Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGE FROM THE QUEEN

MINISTERS OF THE CROWN

The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address as follows:

I have received your Address praying that the Secretary of State for Social Services Order 1968 be made in the form of the Draft laid before your House.

I will comply with your request.

PRIVATE BUSINESS

SELECTION

Motion made, and Question proposed,

That Mr. Hugh Delargy, Mr. Harold Finch, Mr. Harold Gurden, Mr. Clifford Kenyon, Mr. Kenneth Lewis, Mr. Francis Pym, Mr. Harry Randall, Mr. George Rogers, Mr. Thomas Steele, Mr. John M. Temple, and Mr. Wilkins be members of the Committee of Selection—[Mr. Harper.]

Debate arising; and objection being taken to further proceeding, the debate stood adjourned.

Debate to be resumed Tomorrow.

Oral Answers to Questions — MINISTRY OF POWER

Electricity Prices (Large Consumers)

Mr. J. H. Osborn: asked the Minister of Power what is the outcome of his Department's study of special electricity prices for large consumers.

The Minister of Power (Mr. Roy Mason): The possibility of special electricity prices for large consumers is the subject of continuing study by the electricity supply industry, in consultation with my Department. The industry's tariffs already confer considerable advantage on consumers with large and economical loads.

Mr. Osborn: When are we to know what the tariffs will be and which are the industries concerned? Presumably aluminium, chemicals, and perhaps steel, are the industries. When are we to have a definite statement placed before the House on what is the policy?

Mr. Mason: There is no specific study as such. I should remind the House that the statutory responsibility for fixing electricity prices rests ultimately with the boards in consultation with the consultative councils.

Thermal Power Stations (Coal Firing)

Mr. J. H. Osborn: asked the Minister of Power what proposals he is now considering for the construction of coal-fired thermal power stations.

Mr. Mason: The C.E.G.B. are constructing or commissioning some 20,000 MW of coal-fired plant. No additional proposals are under consideration at present.

Mr. Osborn: Although what has been constructed is welcome, what is to be the future of the coalfields in the East Midlands and Yorkshire? Is there not a possible continued use of coal for coal-fired thermal power stations?

Mr. Mason: What is most important is that coal is produced at the right price


so that the C.E.G.B. can use it in large quantities for many years to come. By 1974, 75 per cent. of the plant will still be coal-fired.

Mr. Swain: Is my right hon. Friend aware that the coal-mining industry reduced its production costs by 2s. 6d. per ton to industrial consumers last year and that if this process is continued until 1975 coal will compete favourably in price with nuclear energy or natural gas?

Mr. Mason: Of course I hope that by 1971, at the end of the transitional phase, output per man-shift and increases in productivity will be such that we shall have a hard core of long-life mines and a robust and efficient coal-mining industry.

North Sea Gas (Conversion Programme)

Sir B. Rhys Williams: asked the Minister of Power if he will make a statement on his consultations with the Gas Council on the problems involved in the conversion of consumers to North Sea gas.

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson): The main conversion programme began this year and about 250,000 consumers have been dealt with. The Gas Council have informed my right hon. Friend that a small number of consumers have suffered real inconvenience, but the boards are trying hard to overcome initial difficulties so that the operation is carried out smoothly and efficiently.

Sir B. Rhys Williams: Is the Minister aware that there is widespread public feeling that insufficient has been done to inform consumers, particularly domestic consumers, of their rights? What steps does he propose to take to rectify that?

Mr. Freeson: That is not my experience. I have been around a number of Gas Boards, and I am aware of the tremendous efforts which are being made to organise excellent public relations and information services on this matter. If the hon. Member has a particular case in mind, no doubt he will get in touch with us.

Mr. David Watkins: Is my hon. Friend aware that considerably more than 30

million appliances will have to be converted? Is he satisfied that the Gas Council is geared to this immense task without causing too much inconvenience to consumers?

Mr. Freeson: In a massive operation of this kind, there is bound to be some inconvenience, considering the large number of consumers involved, but we are satisfied that the Gas Council and the boards are well organised for this purpose. There are proposals to strengthen the central organisation in connection with the absorption of natural gas.

Mr. Emery: The Minister said that a small number of consumers had been inconvenienced. What number does he mean by "a small number?"

Mr. Freeson: I am not in a position to quote the specific figure.

North Sea (Exploration Wells)

Mr. Hall-Davis: asked the Minister of Power how many wells have been drilled in the North Sea since 1st January, 1968; how many of these were extension or proving of existing fields and how many were new exploration; how many new exploration wells have produced positive results; and how many of these are likely to prove capable of commercial development.

Mr. Freeson: Seventy-three wells have been completed since 1st January, 1968. Ten were drilled to prove earlier finds and 30 were new explorations. The remainder were production wells. Two exploration wells discovered gas, but further drilling will be required to prove their commercial value.

Mr. Hall-Davis: Will the Minister now publish a revised estimate of total reserves?

Mr. Freeson: We have no reason to do so.

Mr. Eadie: Is my hon. Friend aware that the vast capital expenditure involved in all of this is now being challenged? Is he aware of an article which appeared in the Financial Times to this effect? Is he also aware that quite a lot of other indigenous resources are available to us in this country, and will he examine this whole question and the vast capital expenditure involved from the point of view of the economy in general?

Mr. Freeson: It is implicit in the White Paper on Fuel Policy that there will be a continuing study and revision as and when required of any estimates and figuring in that document As for the rate of absorption in relation to the capital investment programme of the industry, we have no reason to revise our ideas at this stage.

Fuel Requirements

Mr. Kelley: asked the Minister of Power what reassessment he intends to make of the estimate of the fuel requirements of the nation as set out in Command Paper No. 3438 of November, 1967.

Mr. Emery: asked the Minister of Power when he will be able to inform the House on his first retrospective look at the estimates in the Fuel Policy White Paper.

Mr. Mason: As I told the hon. Member for Honiton (Mr. Emery) on 24th July—Vol. 769, c. 151—the monitoring of energy developments is part of the normal work of the Ministry. I will, of course, tell the House if it should lead to any change of policy.

Mr. Kelley: Is the Minister aware that the statement made at the weekend to the effect that the Government were able to reappraise the enegry situation in Britain has received universal welcome in the coalfields? Will he now go further and ask the National Coal Board to suspend any further pit closures on economic grounds until this reappraisal has been completed?

Mr. Mason: On the question of closures, we will be heeding the recommendations of the regional planning chairman and will be determining quite soon what the deferment programme should be for the winter months.

Mr. Emery: As the right hon. Gentleman claimed on 12th July that he was urgently engaged in his first retrospective look at the White Paper, surely now, four months having passed, we should be given an answer.

Mr. Mason: I am now studying the matter as a result of that retrospective look. I met the chairmen of the nationalised industries at Sunningdale. There are later Questions on this issue.

Mr. Palmer: Is my right hon. Friend aware that the White Paper has still not yet been discussed and approved by the House?

Mr. Mason: That is a matter for my right hon. Friend the Leader of the House and not for me.

Mr. Shinwell: My right hon. Friend talks about informing the House when changes are made. Does that mean in future that he will not make decisions when the House is in recess instead of making them when the House is in session, as he did in the case of the decision about Seaton Carew?

Mr. Mason: It depends on the urgency of the matter—[Interruption.]—and what the decision is designed to do. In the case to which my right hon. Friend referred, we were anxious to get 300 men at work by Christmas on the nuclear site.

Sunningdale Conference

Sir G. Nabarro: asked the Minister of Power whether he will make a statement on his recent Summit fuel conferences at the Civil Defence Staff College at Sunningdale, Berkshire, with the National Coal Board and other nationalised fuel industries; and to what extent he has been able to reach an agreed policy for the coal user between the National Coal Board and the Electricity and Gas Boards, and others.

Mr. Lubbock: asked the Minister of Power if he will publish the documents submitted by him to the Sunningdale Conference; what decisions were made at the conference; and if he will make a statement.

Mr. Lane: asked the Minister of Power in what respects he proposes to alter the Government's fuel policy as a result of his recent conference at Sunningdale; and whether he will make a statement.

Mr. Boston: asked the Minister of Power if he will make a statement on the recent talks he had with the chairmen of the fuel and steel industries at Sunningdale.

Mr. Cronin: asked the Minister of Power what consideration he is giving to


reviewing the Government's policy for coal in the light of his recent conference at Sunningdale with the heads of the State fuel industries and the British Steel Corporation.

Mr. William Hamilton: asked the Minister of Power if he will make a statement on his reappraisal of national fuel policy following his recent discussions with the heads of the fuel industries.

Mr. Mason: The Conference at Sunningdale was the first meeting under my chairmanship of the Minister of Power's Co-ordinating Committee, in which the chairmen of the nationalised industries, for which I am responsible, came together for collective discussion on matters of common interest. At this meeting we took the opportunity, as part of the Ministry's continuing work on fuel policy to review developments in the energy sector since the publication of the White Paper, and to discuss the programme for further work on energy problems. The meeting was also concerned with broader general questions of relations between the Government and the industries.
It was not intended to reappraise policy as such, or to reach new policy decisions, and none were taken. The papers and proceedings of the Conference are confidential.

Sir G. Nabarro: That is a very unsatisfactory Answer. Can the right hon Gentleman assure the House that the long-standing hostility between the heads of the gas and electricity industries and the Chairman of the National Coal Board was resolved under his harmonious chairmanship, or does this hostility still remain?

Mr. Mason: I found all the chairmen to be most reasonable and co-operative throughout the conference.

Mr. Lubbock: Is the right hon. Gentleman aware that when his predecessor refused to publish documents submitted to the Selsdon Park Conference, he was forced to disgorge them by the Committee on Science and Technology? Would it not be a good thing for the right hon. Gentleman to publish the documents in this case without being forced into doing so by another Select Committee? Would he agree that it would also be a better

idea to carry forward the estimates in the White Paper on fuel policy, rather than to revise those which have already been made, by adding another year's figures at the end?

Mr. Mason: I do not like the threat underlying the hon. Gentleman's question about my being forced to reveal papers. On the occasion of the Selsdon Park Conference, drafts were before the chairmen in relation to the 1967 White Paper on fuel policy. On this occasion the two or three papers before the chairmen where on entirely different matters and were, therefore, confidential.

Mr. Lane: In view of the importance of keeping down steel prices, what steps is the right hon. Gentleman taking to at least reduce the competitive disadvantage of the steel industry in terms of the price it must pay for fuel compared with its international competitors?

Mr. Mason: That matter was not a subject on the agenda of the Sunningdale Conference.

Mr. Hamilton: Does my right hon. Friend recognise that this House is entitled to information which is bandied about between the chairmen of nationalised industries and my right hon. Friend? Is it not the case that if my right hon. Friend is not forthcoming in this regard, a Select Committee of this House will ensure that it gets the information to which it is entitled?

Mr. Mason: I fully appreciate the point of view of my hon. Friend and the hon. Member for Orpington (Mr. Lubbock)—

Sir G. Nabarro: What about me? I started it.

Mr. Mason: Hon. Members will be fully aware that if threats of this kind are to be made and if Select Committees are to search for papers, it is understandable that in future those who prepare papers for these round-table conferences will always have these matters in mind.

Mr. Emery: As the Minister must appreciate that all of industry makes budgets and forecasts as a result of the White Paper on fuel policy, will he say categorically that the Selsdon Park Conference did not revise the budgets and


forecasts, and so enable industry to know exactly where it stands?

Mr. Mason: That is true. It did not revise them, although there was a matter which perturbed the Chairman of the N.C.B. As I said, the other chairmen were co-operative and responsible throughout the conference and appreciated his difficulty; and we are prepared to look afresh at the new trends in coal.

Mr. Edwin Wainwright: Is my right hon. Friend aware that rumour might result in disturbing stories being sent out to the public, so bringing a tremendous amount of fear to the hearts of the miners? Will he now publish the evidence which was arrived at at that conference, and so make us all aware of the facts?

Mr. Mason: It would not help matters to publish such evidence because it has nothing to do with the matter before us. I said that the chairmen appreciated the position of the Chairman of the National Coal Board in relation to the recent rundown in manpower figures. Because of that, we are looking afresh at the trends in coal.

Several Hon. Members: rose—

Mr. Speaker: Order. Mr. Irvine, Question No. 11.

Sir G. Nabarro: On a point of order. In view of the unsatisfactory nature of the Minister's Answer, I beg to give notice that I shall seek to raise this matter on the adjournment.

Mr. Speaker: Such notice should be given more quickly.

Underground Cables (Research)

Mr. Bryant Godman Irvine: asked the Minister of Power what discussions he has had with the Electricity Council with regard to increasing the level of its appropriation for research, particularly into the possibilities of placing 132 and 225 kilovolts cables underground.

Mr. Freeson: My right hon. Friend will shortly discuss with the Chairman of the Electricity Council their general programme of research, but we believe they have the right order of expenditure

on underground cables generally and on high voltage in particular.

Mr. Godman Irvine: Would the Parliamentary Secretary tell us any other organisation which is trying to keep abreast of a technological field and which spends less than 1 per cent. of its annual revenue on research? Now, with a substantial profit, is this not the moment to reconsider it?

Mr. Freeson: It would be more correct to consider the actual figures. I understand that approximately £300,000 is spent specifically on underground cables and that a substantial part of the £700,000 which is being spent on high voltage direct current transmission and superconductivity is also related to undergrounding.

Mr. Hall: Would the hon. Gentleman not look again at the amount of research devoted to the particular problem of placing cables underground, before the countryside becomes irretrievably ruined by the mass of pylons and overhead wires?

Mr. Freeson: I, and doubtless other hon. Members, would appreciate it if a little less colourful phraseology were used. I have no doubt—I am as concerned as anyone here about the countryside—about the responsible attitude which the C.E.G.B. seeks to take. The last complete year's figures available show that about £6 million was spent on amenity in addition to commercial costs by the Board.

Investment Policy

Mr. Ridsdale: asked the Minister of Power whether he will make a statement on future investment policy in the gas, coal and electricity industries.

Mr. Freeson: This is as stated in White Papers Cmnd. 3437 and 3438.

Mr. Ridsdale: But is the hon. Gentleman not being rather inflexible in this policy? Does not the rapid expansion of gas investment during 1968–73, both on conversion and on capacity, render the subsequent large investment in electricity rather unnecessary?

Mr. Freeson: The hon. Member could not have heard my Answer. I


referred, quoting the White Papers concerned, among other things to the White Paper on Fuel Policy, which lays down the guide lines for investment, and we are sticking to them.

British Steel Corporation (Capital Return)

Mr. Biffen: asked the Minister of Power what is the target return on capital employed he proposes to set for the British Steel Corporation; and how this compares with the estimated current return.

Mr. Freeson: My right hon. Friend has not yet settled a financial objective with the Corporation. In 1966–67 the nationalised steel companies' return on capital employed was 1·9 per cent. after depreciation but before tax and interest.

Mr. Biffen: Would the hon. Gentleman not agree that utmost priority must be given to the determination of a return of interest? Could he say whether, in the pursuit of economic excellence, it is the intention of his Ministry to relate that return to the most profitable rates of return of North American and European steel manufacturers?

Mr. Freeson: The position is as laid down in guidelines in the White Paper on the Nationalised Industries, Cmnd. 3437, to which I have referred. To quote from it, the targets which we will be seeking to reach as soon as possible
…should reflect sound investments and pricing policy and not vice versa.
That is a policy to which we shall adhere.

Steel Prices

Mr. Biffen: asked the Minister of Power what proposals he has received from the British Steel Corporation seeking to raise the prices of its products; and if he will make a statement.

Mr. Freeson: None, Sir; but the Corporation's major price review is nearing completion and my right hon. Friend expects to receive their conclusions before the end of the year.

Mr. Biffen: When making those considerations, will the hon. Gentleman bear in mind that the present rate of return of the British Steel Corporation is ludicrously low if it is to finance its capital

investment to any degree at all out of retained profits? Would he also ensure that any price increases are so organised as not to discriminate against the substantial private sector which still operates in the British steel industry?

Mr. Freeson: Those words are noted on the record, but I cannot anticipate the Corporation's conclusions, which will be presented to my right hon. Friend.

Aberfan Inquiry (Recommendations)

Mr. S. O. Davies: asked the Minister of Power what progress has been made by Her Majesty's Government in implementing the recommendations of the Aberfan Tribunal of Inquiry.

Mr. Mason: I shall review progress when I move the Second Reading of the Mines and Quarries (Tips) Bill on Thursday.

Mr. Davies: Would my right hon. Friend bear in mind, whatever transpires on Thursday, the appalling cost which the people of Aberfan have had to face, and that no further cost should be expected from them—as otherwise his Bill will be strongly opposed?

Mr. Mason: As I said, I cannot anticipate my review on Thursday, but no doubt my hon. Friend should feel extremely grateful that we have made progress and that the Bill is before us this week.

Mr. Gibson-Watt: Is the right hon. Gentleman aware that we on this side are glad of the Government's intention to deal with the tips at Aberfan? How much money, however, has been spent on this tip between the disaster and now? Have we to wait for the passing of the Bill before any further work can be done?

Mr. Mason: The original Question had nothing to do with the Aberfan tip, but with the Bill which is before the House. I believe, however, that £600,000 has already been spent on the tip since that time.

Sheffield Rolling Mills Company

Mr. Ridley: asked the Minister of Power what is the reason for the retention by the British Steel Corporation of a 45 per cent. holding in the privately-owned Sheffield Rolling Mills Company.

Mr. Hooley: asked the Minister of Power (1) whether, before approving the application by the British Steel Corporation, he will make it a condition that the Corporation shall have a 51 per cent. holding in the proposed new steel company, Sheffield Rolling Mills Limited;

(2) if he will make a statement on the official discussions which have taken place with the Trades Union Congress Steel Consultative Committee about the proposed formation of Sheffield Rolling Mills Limited and which involve the transfer of publicly-owned assets worth £3 million to the private sector of the steel industry.

Mr. Mason: I am satisfied that the general arrangements agreed for Sheffield Rolling Mills Ltd., are in the interest of the nationalised steel industry, although I will not give final approval until satisfactory detailed terms to give effect to them have been worked out. I have agreed to send the T.U.C. Steel Industry Consultative Committee a paper setting out the position.

Mr. Ridley: But since this company is to be returned to the private sector, can the Minister explain why the taxpayers' money is to be spent on investments in it? He must give a reason for spending public money. What is the reason for this 45 per cent. holding in an ordinary private company?

Mr. Mason: Because the Tinsley Park Bar Mill comes under the B.S.C., the B.S.C. wants to safeguard its interests and it is satisfied that its 45 per cent. interest will do just that.

Mr. Hooley: Is my right hon. Friend aware that the contribution of the private sector to this venture is, to some extent, on their own admission, in the form of obsolescent plant and equipment, while the contribution of the public sector is in the most modern plant in Europe? Would it not be more equitable to the taxpayer, who has already paid for this plant, if a majority holding in the new company were held by the British Steel Corporation?

Mr. Mason: The Tinsley Park Bar Mill has never worked above 50 per cent. capacity, and has been making heavy losses in recent years. The B.S.C. is satisfied with the suggestion that it shall

have the managing director and two directors as well on the new company and that its interests will be safeguarded.

Helium Supplies (North Sea)

Mr. Lubbock: asked the Minister of Power what information he has about the proportion of helium in each of the natural gas fields discovered in the North Sea; and if he will undertake a study to ascertain the probable cost of extracting this helium, and the potential market for it in cryogenic laboratories.

Mr. Freeson: All natural gas supplies in the North Sea contain a very small proportion of helium. Detailed information is reported to me by the licensees, but it is confidential. With regard to the second part, I am looking into this with my right hon. Friend the Minister of Technology.

Mr. Lubbock: I thank the hon. Gentleman for that reply. Does he appreciate that all the liquid helium used in cryogenic laboratories must be imported from the United States and Canada and that, if it were feasible to extract the material from the North Sea, we would achieve a substantial import saving?

Mr. Freeson: The point is taken, but on present information—I stress those words—the cost of extracting helium from the North Sea would, it seems, be more expensive than our present imports.

Fuel Consumption Forecasts

Mr. Speed: asked the Minister of Power what estimate he has made of the percentage of coal in total fuel con sumption in 1971, and of the tonnage which this will represent.

Mr. Freeson: Estimates of coal consumption were published in the Fuel Policy White Paper (Cmnd. 3438).

Mr. Speed: Does that reply mean that, notwithstanding Brookings, the E.I.U. and other reports, the present rate of run-down will be maintained?

Mr. Freeson: We have no reason at this stage to revise the forecast announced in the White Paper.

Electricity (Pylon Routes)

Mr. Bryant Godman Irvine: asked the Minister of Power whether he is


satisfied with the operation of the existing procedures for prior consultations between his Department and the Central Electricity Generating Board on pylon routes; and if he will make a statement.

Mr. Freeson: The Board consults local planning authorities and other bodies, not with the Department, and my right hon. Friend is satisfied that these procedures work well.

Mr. Godman Irvine: Has the Parliamentary Secretary taken into consideration the fact that on two occasions this year those procedures have not worked in that the appeals were rejected? Does not this indicate that he should have another look at the matter?

Mr. Freeson: The whole object of having independent appeals procedure is to ensure that a view is taken independently of the industry and the appellants on either side. The Minister cannot get involved in procedures because he is in a quasi-judicial position at the end of the day.

Gas Industry (Capital)

Mr. Emery: asked the Minister of Power how much of the new £1,600 million capital provided for the gas industry has already been taken up; and what proportion of the borrowing power it is estimated will be used in the current fiscal year and the fiscal year 1969–70.

Mr. Mason: £1,600 million is the total of the old borrowing powers and the new borrowing powers granted under the Gas and Electricity Act, 1968. The Gas Council and boards have not yet taken up any of their new £400 million borrowing powers.

Mr. Emery: If the views in the Select Committee on Nationalised Industries concerning North Sea gas are accepted, would the Minister not consider that the total borrowing power ought to be looked at again and that there ought to be some reconsideration of it? Will he consider the whole matter in the light of the Select Committee's Report?

Mr. Mason: I do not see any reason for reconsidering this in the light of the Select Committee's Report. I do not know to what specific recommendation the hon. Member is referring, but on the whole the Select Committee's Report is

fairly favourable and it has established so far that there are 25 years' supplies of North Sea gas at the rate of 3,000 m.c.f.d. and this is coming along as planned.

Mr. Palmer: Is my right hon. Friend satisfied that control of this vast expenditure should be in the hands of the Gas Council? Is it not a matter of general interest, particularly in view of natural gas, to the fuel industries generally?

Mr. Mason: I scrutinise rigorously investments of all the boards each year.

Gas Industry (Cable Laying Powers)

Mr. Lane: asked the Minister of Power whether, in his forthcoming legislation on the structure of the gas industry, he will consider empowering it to lay electric cables as part of total energy schemes.

Mr. Freeson: My right hon. Friend has no such proposal in mind at present.

Mr. Lane: In view of the very high thermal efficiencies achieved by some of these schemes in the United States, has the Minister any plans in this Session to get rid of some of the rigidities in structure of our nationalised energy industries?

Mr. Freeson: That is a rather different question from the question about power to lay cables. If we are to look at this question it should not be considered solely from the point of view of one of the fuel industries, for there is an interest in this right across the board.

Continental Shelf

Mr. Boston: asked the Minister of Power what progress he is making in his study of the future exploration of the Continental Shelf.

Mr. Freeson: It has just begun.

Mr. Boston: I welcome my hon. Friend's statement. Can he give an idea of how long the study is likely to take and whether he will be publishing the results? Does he envisage announcing changes in the licensing procedure before the present arrangements come to an end in 1970 and 1971?

Mr. Freeson: This is a subject which is part of a study which has just begun.


There is time available, as the licences do not fall due until 1970 and 1971, so I am sure that we shall be able to come up with the answers well before then.

Mr. Emery: Will the hon. Gentleman say a little more about licences which have not been let, particularly as there is some comment that he should be encouraging the oil companies to begin drilling in the Irish Sea, the Bristol Channel and, indeed, the northern part of the Continental Shelf?

Mr. Freeson: This is one of the matters which will have to be considered as part of the study. There are a number of factors to be taken into account, not least the objectives set out in the Labour Party's recent study document on this subject.

Electricity Generating Capacity

Mr. Palmer: asked the Minister of Power what is the margin of surplus generating capacity likely to be attained by the Central Electricity Generating Board in the coming winter; if the level is such that power cuts will be avoided; and if he will make a statement.

Mr. Mason: The Central Electricity Generating Board expects to have a margin of about 20 per cent. over the maximum demand in average cold spell weather. This should be fully adequate.

Mr. Palmer: Does not my right hon. Friend agree that, although we should congratulate the C.E.G.B. on this very excellent result, this now presents an opportunity to the Board to take out of service some of its really old plant and hence increase the general efficiency of the British electricity supply system?

Mr. Mason: Yes, and as the new plant is coming into commission the Board is taking advantage of the margin to do exactly that.

Sir Harmar Nicholls: Can we take the right hon. Gentleman's answer as disposing of the rumour that night storage heater costs are to be increased?

Mr. Mason: I should want notice of that question.

New Power Stations (Report)

Mr. Palmer: asked the Minister of Power when he expects the Committee

headed by Sir Alan Wilson to inquire into the causes of delays in commissioning the new power stations of the Central Electricity Generating Board to report.

Mr. Mason: I hope to have the Committee's report by early next year.

Mr. Palmer: Is my right hon. Friend satisfied that this Committee, which is a little inbred in its membership, will give him a really impartial and penetrating report on this very serious problem?

Mr. Mason: Yes. The Committee is treating this very seriously. I do not accept my hon. Friend's view that the Committee is inbred. It has already met twenty times and is still collecting evidence and visiting power station sites. I shall have its report by the turn of the year.

Seaton Carew Power Station

Mr. Willey: asked the Minister of Power what steps he is taking to ensure that the construction of the Seaton Carew power station provides maximum employment for persons in the North-East.

Mr. Mason: The Central Electricity Generating Board's specification provides that the contractor should make the maximum use of all suitable local labour and should give consideration to placing sub-contracts with local firms where appropriate.

Mr. Willey: Is my hon. Friend aware that it was a disappointment to the North-East that we did not get the contract? In view of the importance of getting work of this character to the North-East, will my right hon. Friend ensure that this provision is fully carried out?

Mr. Mason: I will certainly watch that. As my right hon. Friend knows, Babcock English Electric Nuclear Limited got the contract. Seventy men are already on the site. There should be several hundred employed by mid-winter.

Dame Irene Ward: Will the right hon. Gentleman give the date when it was decided to call for tenders?

Mr. Mason: I could not give that offhand, but if it is perturbing the hon. Lady I will write to her about it.

Mr. Shinwell: Can my right hon. Friend give me an assurance that men


who have been made redundant in my constituency as a result of the closure of pits because of the action of the Coal Board, with the consent of the Government, of my right hon. Friend's Department in particular, will be re-employed on the site at Seaton Carew?

Mr. Mason: No doubt some of them will be, but most of the unemployed in my right hon. Friend's area are construction workers and not miners.

Mr. Blenkinsop: Will my right hon. Friend give special attention to the facilities available in the switchgear industry for this very important contract on Tyneside?

Mr. Mason: No doubt that will be taken into consideration by the contracting company.

Oral Answers to Questions — COAL

Pit Closures

Sir B. Rhys Williams: asked the Minister of Power what estimates he has made of the value of capital that will have to be written off in the period 1968–69 within the coal industry as a result of pit closures.

Mr. Freeson: Of the £129 million written off from the Reserve Fund in the N.C.B.'s 1967–68 Accounts about £38 million was for pit closures expected in 1968–69.

Sir B. Rhys Williams: Is the hon. Member prepared to lay before the House the plans for pit closures expected this winter?

Mr. Freeson: That is another question.

Mr. Emrys Hughes: Is the Minister aware that in my constituency, where there have been extensive pit closures, they are advertising for coal miners? Would he comment on that?

Mr. Freeson: I hope that the advertising and recruiting campaign will be effective, but it is not germane to the Question.

Mining Industry (Production)

Sir G. Nabarro: asked the Minister of Power whether he will make a state-

ment on the undertakings he has given to the National Coal Board, and the National Union of Mineworkers, for future production arrangements for the coalmining industry and reduced rate of pit closures; and whether he will now publish, as amended, the Government's White Paper on Energy Policy.

Mr. Mason: I have given no such undertakings, but I am studying recent developments in the industry.

Sir G. Nabarro: Has not the right hon. Gentleman perceived that in the first 42 weeks of this year the massive number of 50,000 men left the coalmining industry, reducing its labour force by 13 per cent., so that the rate of output of coal has declined by no less than 8 million tons a year? Is he satisfied with that calamitous rate of depreciation of our most important basic industry?

Mr. Mason: I have also noticed that output per man shift has increased faster than we anticipated and that the number of industrial disputes in the industry this year is the lowest on record.

Mr. Swain: Is my right hon. Friend aware that in the 1967 White Paper natural gas, oil and nuclear energy were given guaranteed markets? In any review of the 1967 White Paper, will my right hon. Friend make it compulsory for these three industries to compete on equal terms with the coal-mining industry?

Mr. Mason: I will, of course, give consideration to any suggestions made by my hon. Friend.

Pricing Policy

Mr. Speed: asked the Minister of Power if he is yet ready to make a statement on the pricing policy of the National Coal Board.

Mr. Freeson: No, Sir.

Mr. Speed: Is it the Minister's intention that the N.C.B.'s present pricing policy will continue to result in the closure of long-life, marginally profitable, high-output coalfields?

Mr. Freeson: That is another question, but we do not expect the results of the study referred to in the Question before the end of the year.

Pithead Costs

Mr. Ridley: asked the Minister of Power what is currently the long-term marginal cost of coal at the pit head.

Mr. Mason: I would refer the hon. Member to the reply given by my hon. Friend the Parliamentary Secretary on 26th July.—[Vol. 769, c. 261.]

Mr. Ridley: Will the Minister confirm that it is the Government's policy that nationalised industries should charge prices related to long-term marginal costs? Would he further confirm that in the case of the Coal Board these prices are very different from those which are in fact being charged?

Mr. Mason: Long-run marginal costing is being studied in the current review of the N.C.B.'s present structure, but the hon. Member should be aware that forecasting in this industry is terribly complex because it is subject to a great deal of change and depends on assumptions about productivity, rate of extraction, and, as this is a labour industry, also on the cost of labour.

Scotland (Pit Closures)

Mr. Gordon Campbell: asked the Minister of Power if he will make a statement on the proposals for pit closures in Scotland in 1969.

Mr. Mason: The programme of colliery closures for 1969 is in the process of being formulated by the National Coal Board. It has so far announced the closure of Roslin Colliery and that the results of three other colleries are such as to put their future in jeopardy.

Mr. Campbell: What action is the Minister taking with other Ministers concerned to make special arrangements for redundant miners in view of the fact that the total number of jobs of all kinds in Scotland has fallen by more than 20,000 since 1964?

Mr. Mason: Apart from the tremendous work which Ministers are putting in to make sure that alternative employment is available, we recognise that the outflow from the mines may be faster than we can install or erect new employment. Therefore, we introduced the over-55 scheme and 33,000 miners will benefit

under that scheme. This is easing the situation.

Mr. William Hamilton: Will my right hon. Friend say which three pits have their future in jeopardy? What progress has been made in providing alternative jobs in the areas designated as special development areas consequent on pit closures?

Mr. Mason: On the S.D.A.s my hon. Friend should address his Question to the Board of Trade. The three pits concerned are Blair, Auchincruive and Kennox. No other closures are contemplated in the winter.

Mr. Eadie: Is my right hon. Friend aware that Roslin Colliery is in my constituency and that this is the second pit closure in my constituency in a very short time? Is he aware that these closures are causing concern among miners not only in my constituency but all over Scotland?

Mr. Mason: I am fully aware of anxieties about pit closures because there have been five in my constituency. I do not think I can take it much further than that. We shall be dependent on chairmen of regional planning committees letting us know where a pit closure will cause or aggravate high unemployment rates in the regions and they will be considered for deferment.

Brookings Institution (Report)

Mr. Alison: asked the Minister of Power whether he has considered the proposals for a slower run-down of the coal industry made in the Brookings Institution study, Britain's Economic Prospects, extracts from which have been sent to him; and what steps he plans to take on the proposals.

Mr. Mason: The energy section of the Brookings' Report was written before the publication last November of the Fuel Policy White Paper. The Report fails to recognise that more is being done now to slow down the contraction of the coal industry than has been done by any other Government.

Mr. Alison: Does the Minister appreciate that the Brookings Institution Report throws at least some reasonable doubt on the wisdom of the Government's proposed rate of run-down of economic


pits between 1970–75? In view of the fact that the run-down will have catastrophic results in the Yorkshire Coalfield where there are very few alternative employment opportunities, will he give the coal industry benefit of doubt on the Report?

Mr. Mason: No, I will not. As I said, the Brookings Report came out before I the Institution had available the analysis we made and the papers we prepared for fuel policy. There have been three independent reports since 1966, the P.E.P., the E.I.U. and the Brookings and they all came to different conclusions.

Mr. Ridley: Would the right hon. Gentleman agree that if the Government pursued their own policy of adopting long-term marginal costing for coal the price of coal would go up and the rate of decline in the coal industry would therefore increase?

Mr. Mason: That is not necessarily true, but we shall wait to see what the Coal Board says about long-term marginal costing when it has put forward its new pricing policy.

Smokeless Fuels

Mr. Alison: asked the Minister of Power if he estimates that winter output and supplies of smokeless fuels will be adequate to meet demand.

Mr. Gwilym Roberts: asked the Minister of Power if he is aware of the difficulties in many parts of the country in obtaining supplies of anthracite and other smokeless fuels; what statistics are available for the demand and supply of such fuels; and what steps he is taking to improve the supply.

Mr. Freeson: My right hon. Friend is aware of difficulties in some parts of the country in supplies of particular smokeless fuels. Discussions have been held between producers, British Rail, merchants and the Department, and the National Coal Board has told my right hon. Friend that it is increasing supplies of smokeless fuels, particularly anthracite nuts.
Supply and demand figures for smokeless fuels appear in the Ministry of Power's Statistical Digest. Weekly disposals

and merchants' stocks of anthracite and boiler fuel are also published in the Ministry's Weekly Statistical Statement.

Mr. Alison: What will be the position in regard to more specialised smokeless fuel such as "Home-fire" or "Bronowski Bullets" as they are sometimes called? Does the industry show the same wide-eyed optimism as the National Coal Board about these fuels or does it take a more moderate view?

Mr. Freeson: I will ignore the rather wide-eyed adjective used by the hon. Member and say that there will be difficulties as I have indicated this year, but the N.C.B. and the merchants think that they can master the difficulties and that there will be sufficient supplies available.

Mr. Roberts: Is my hon. Friend aware that many people are dependent for cooking facilities on some of these fuels and if the clean air policy is to have any meaning these fuels will have to be readily available?

Mr. Freeson: I certainly agree with my hon. Friend. A tremendous effort is being made in consultation with the various parties to whom I have referred to get the matter reconsidered for this winter and to ensure that there are no difficulties in future.

Dr. Gray: Is my hon. Friend aware that some of my rural constituents have been cooking on Aga stoves for 20 years and this is the first time that they have not been able to obtain Phurnacite? Will he look into the matter and act quickly?

Mr. Freeson: If my hon. Friend will give information to the N.C.B. and merchants they will pursue the matter.

Redundancy Payments (Appeals)

Mr. David Watkins: asked the Minister of Power what plans he has to establish an appeals procedure for dealing with applications for benefit under the Redundant Mineworkers (Payments) Scheme, 1968.

Mr. Freeson: My right hon. Friend has agreed with the unions the establishment of local committees to examine disputed cases, and is discussing with the Department for Employment and Productivity how we might call upon the


personnel of industrial tribunals as advisers in such cases.

Mr. Watkins: Is my hon. Friend aware that the National Coal Board appears to be interpreting the Order very narrowly and legalistically and not in the spirit which I am sure was intended by hon. Members who supported the Order in the House? Can we be assured that borderline cases will be given very adequate attention by the very welcome machinery which my hon. Friend is setting up?

Mr. Freeson: It is not for me to comment on particular cases across the Floor of the House. I only hope that the machinery to which I have referred will be set up soon so that disputes can be solved through it.

Oral Answers to Questions — SCHOOL MEDICAL SERVICE

Dr. Winstanley: asked the Prime Minister if he will transfer responsibility for the school medical service from the Department of Education and Science to the Department of Social Services.

The Prime Minister (Mr. Harold Wilson): I see no case for doing so at present.

Dr. Winstanley: Does the Prime Minister recall that the school medical service was set up at a time when there was a very real financial barrier between many children and the doctors, that this barrier has now largely disappeared, and that there is therefore a need to reassess the rôle of the school doctor and to try to bring him into closer contact with the general practitioner and other services instead of leaving him in his present position of damaging isolation?

The Prime Minister: I do not accept the phrase "damaging isolation", though I recognise that there is disagreement within the hon. Gentleman's own profession on this question. As the hon. Gentleman will know, a very high proportion of school medical officers are medical officers of health or on the staff of medical officers of health, so the service is integrated with the community in that way. Also, quite a high proportion of them are general practitioners.

Mr. Pavitt: Will my right hon. Friend take it from me that there is a duplica-

tion and waste of very valuable medical manpower in this field? If he cannot transfer this service at the moment, will he have consultations with the two Ministers concerned to have a study made in the hope that we shall have a more rational approach?

The Prime Minister: I will certainly discuss it with my two right hon. Friends. This matter has been kept under review on a number of occasions. It can be looked at again at any time, though I do not accept that there is a waste of medical manpower by the present situation.

Oral Answers to Questions — PRIME MINISTER OF NORTHERN IRELAND (DISCUSSIONS)

Mr. Judd: asked the Prime Minister whether he will make a statement on his consultations with the Government of Northern Ireland concerning recent events in that territory.

Mr. Whitaker: asked the Prime Minister whether he will make a statement on his recent talks with the Prime Minister of Northern Ireland.

Mr. McNamara: asked the Prime Minister if he will make a statement on his talks with Captain O'Neill.

The Prime Minister: My discussions with the Prime Minister of Northern Ireland covered five main areas: the local government franchise, allocation of housing, recent events in Londonderry, the Special Powers Acts, and the appointment of a Parliamentary Commissioner for Administration in Northern Ireland. We agreed to report back to our colleagues.

Mr. Judd: I thank my right hon. Friend for that reply. Is he aware that there is widespread feeling in Great Britain that there is much in Northern Ireland that is an affront to the standards of democracy and human rights which we like to take for granted in Britain and that he will have all possible support in any action he thinks it necessary to take?

The Prime Minister: Without associating myself with the particular words used by my hon. Friend, I can say that I am well aware, and the whole House is aware, of the very great feeling in the


House, not entirely on this side of the House, and the feelings and the reasons for these anxieties were very fully represented to Captain O'Neill and his colleagues.

Mr. Whitaker: By when may we expect universal local franchise in Ulster, and by when may we expect a multi-religious body to investigate allegations of religious discrimination impartially?

The Prime Minister: With regard to the local government franchise, the current expectation is that this would take some little time, because it would be waiting until after the very necessary and complicated system of local government reform. We have represented that it is urgent that the local authority franchise should be got on with now, because the principles underlying one man, one vote, the company vote and the rest on the franchise are just as applicable whatever the form of local government boundaries or local government units there.

Mr. McNamara: Is my right hon. Friend aware that when this subject was discussed yesterday we had no refutation of the allegations made against the Ulster situation other than a vicious and monstrous personal attack upon my hon. Friend the Member for Belfast, West (Mr. Fitt)? Did the Prime Minister of Northern Ireland give any firm undertaking about the reforms that he is likely to introduce and name any firm date other than some of the vagueness that appeared in some sections of the Press this morning?

The Prime Minister: Both Captain O'Neill and I will be reporting back to our colleagues. It will be then a matter for decision how this matter will be carried further forward. Captain O'Neill can be in no doubt about the contrast we are able to point to between the handling of these matters in the recent demonstration in London and what happened in Londonderry recently. I am proposing to send to Captain O'Neill the report by the three hon. Members of this House which came to me. It is right that this report should go to Captain O'Neill, because Northern Ireland has the full responsibility in these matters of internal law and order and I think that this report should be seen by them. I think that the whole House would feel more confidence

in the administration of that particular incident if the Northern Ireland Government were to appoint an impartial inquiry into what happened.

Mr. Heath: Does not the Prime Minister agree that, if progress is to be made in Northern Ireland in the way which most hon. Members want, this can be done only by supporting those in Northern Ireland who are pursuing a moderate policy, and that to do otherwise is only to play into the hands of extremists, with results which may well be very damaging for both Northern Ireland and this country?
Second, I refer to the list which the right hon. Gentleman read of subjects discussed with Captain O'Neill. He did not mention the Constitutional Commission proposed in the Queen's Speech. Was this discussed, and, if not, what was the reason for not discussing it?

The Prime Minister: On the first part of the right hon. Gentleman's question, I very much agree, and I think that the whole House will, with what he said. Many of us on many occasions have paid tribute to the reforming liberalism, as far as it has gone, of Captain O'Neill; it ought to be encouraged to continue. On the other hand, we cannot get into a position where his vulnerability to pressures from the extremists referred to by the right hon. Gentleman could be used as an occasion for blackmail and could be used on occasion where we failed to press for the reforms which are necessary. If Captain O'Neill were thrown over, or what he is trying to do were thrown over, by extremists, we should ourselves need to consider a fundamental reappraisal of our relations with Northern Ireland. Meanwhile, therefore, he should be encouraged in pushing on with reform as fast as he can.
Now, the second part of the right hon. Gentleman's question. We did not discuss the Commission about the constitution with Captain O'Neill at this stage. It will be discussed later. We spent most of the time discussing matters which are really urgent in relation to decisions which have to be taken now.

Captain Orr: Will the Prime Minister agree that, in so far as there exists any real or alleged religious discrimination in the allocation of houses or employment, by far the best answer is to build


enough houses and to create enough employment? Will he assure us that Her Majesty's Government will continue to give the maximum financial support to the Government of Northern Ireland for these purposes?

The Prime Minister: The simple answer to the problem raised by the hon. and gallant Gentleman is to stop the discrimination. I welcome the progress made in the number of houses built in Northern Ireland over the past few years, just as, I am sure, the hon. and gallant Gentleman will welcome the unprecedented financial assistance which this Government have been giving for that and other purposes. However, if there were a general acceptance of standard rules for allocations, on the basis of a points system or something of that kind, in each local authority, the allocation of houses would be far more automatic and would not be subject either to discrimination or to suspicions of discrimination.

Mr. Thorpe: Is the Prime Minister aware that some of us regard the proposed Commission on constitutional reform as sufficiently important to merit debate in the House, which is why we had a debate yesterday, though, unfortunately, we were not supported by the Opposition?
I accept the confidentiality of the Prime Minister's talks with Captain O'Neill, but will he confirm that it is his view that all people in the United Kingdom may enjoy equal human rights in the immediate and foreseeable future even if they live in Northern Ireland?

The Prime Minister: The right hon. Gentleman will understand that we are about to enter into consultations. We should start the consultations here first, before we have discussions with the Government of Northern Ireland, but we shall then discuss the matter with the Government of Northern Ireland and with other relevant bodies and authorities. However, there are certain matters, as I said last week in the debate on the Queen's Speech, which are too urgent to wait for consideration by a Constitutional Commission, including those raised by the right hon. Gentleman himself. For example, discrimination and the question of the Special Powers Act, for which we

bear international responsibility, are matters which must be discussed urgently.

Sir Knox Cunningham: Will the Prime Minister condemn attacks on the police, whether they occur in Grosvenor Square or Londonderry, and condemn any Member of Parliament who encourages such attacks?

The Prime Minister: I shall certainly not respond to the latter part of the hon. and learned Gentleman's question. That is what this House exists for—not least, abuses of power by the police or anyone else.

Mr. Chichester-Clark: The right hon. Gentleman misunderstood my hon. and learned Friend's question.

The Prime Minister: I could not hear the first few words, but I think I heard the last. If the hon. and learned Gentleman was referring in his first few words—he will correct me if I am wrong—to attacks on the police, I am sure that the whole House will join the Leader of the Opposition in the tribute paid to the London police last week. We shall pay tribute whenever it is due. But we must also comment on brutality when there are signs of that brutality. If I did not understand the question aright, I shall be glad if the hon. and learned Gentleman is given leave to repeat it.

Mr. Speaker: Order. The Prime Minister has asked the hon. and learned Member for Antrim, South (Sir Knox Cunningham) to put his supplementary question again. I call him to do so.

Sir Knox Cunningham: I am much obliged, Mr. Speaker. Will the Prime Minister condemn any Member of Parliament who encourages attacks on the police, whether in Grosvenor Square or in Londonderry?

The Prime Minister: I am sorry; there was so much noise that I did not quite hear it. I thought that the hon. and learned Gentleman was referring to attacks on the police in the form of Questions or in the form of statements. If he was referring to anyone, be he Member of Parliament or anyone else, who stimulates provocation to the police, whether in Grosvenor Square, Londonderry, or anywhere else, all of us would


condemn that, irrespective of whether the instigator was a Member of Parliament or not. I am sorry that I did not understand the question in the first place.

Sir Knox Cunningham: I am obliged.

Oral Answers to Questions — WESTERN EUROPEAN UNION AND COUNCIL OF EUROPE (PARLIAMENTARY DELEGATIONS)

Mr. Arthur Lewis: asked the Prime Minister whether, in future, when re-appointing those delegates who have attended conferences such as the Western European Union and the Council of Europe, he will publish their attendance records at such conferences for the time for which they were previously appointed.

The Prime Minister: No, Sir. But previous attendance is one of the factors which is taken into account in selecting delegates.

Mr. Lewis: I thank the Prime Minister for that full and expected reply.

Oral Answers to Questions — RHODESIA

Mr. Winnick: asked the Prime Minister if he will make a statement on the latest position on Rhodesia.

The Prime Minister: I have nothing at present to add to the statement I made on 1st November, 1968.

Mr. Winnick: If legal independence is in due course given to the Rhodesia Front, is it not obvious that one of the certain effects will be the breaking up of the Commonwealth, apart from other effects nearer at home?

The Prime Minister: No, Sir. I think that this would be difficult for a number of members of the Commonwealth, but I indicated last week some of the realities in the situation. We should all be sorry to feel that any member of the Commonwealth valued the Commonwealth link so lightly as to leave it on account of an agreement with Rhodesia, if that becomes possible, in relation to the six principles. It is relevant to tell our Commonwealth friends that what they have sought to insist on in relation to Rhodesia it is equally their duty to insist on in relation to Gibraltar, where, I am sorry to say, despite the declared wishes of 99·9 per

cent. of Gibraltarians, they have voted for Gibraltar to be handed over to Spain.

Mr. Thorpe: Will the Prime Minister confirm that one of the great values which many of our fellow members of the Commonwealth attach to continued membership of it lies in the fact that it is multi-racial? Will he confirm or deny that he has been given advice that a settlement on the basis of the "Fearless" proposals would result in at least four members leaving the Commonwealth?

The Prime Minister: I cannot give any credibility to that newspaper report. I am aware of the strong feelings of a number of members of the Commonwealth—more than four, in fact—but not to the extent of seeking to leave the Commonwealth if this were done. The multi-racialism of the six principles is the very basis on which successive Governments have insisted simply because it is multi-racial and will ensure majority rule in Rhodesia.

Oral Answers to Questions — GERMAN CHANCELLOR (COMMUNICATION)

Mr. Marten: asked the Prime Minister what communication he sent to the German Chancellor in September about Anglo-German collaboration; what reply he has received; and if he will make a statement.

The Prime Minister: My letter was confidential, but I can tell the House that it dealt generally with the need and the opportunities for closer European cooperation and the part that our two countries could play in this. A reply has not yet been received.

Mr. Marten: Can the Prime Minister hazard a guess as to why a reply has not yet been received, and will he take the House a little more into his confidence on this important matter? Does he, for example, equate it in any way with the Debré proposals made yesterday at Brussels?

The Prime Minister: I think that the reason why no reply has been received is that things have moved on a good deal since the letter was sent. There is continuing contact between my right hon. Friend and the German Foreign Minister. These matters will be further discussed


when I visit Germany in the New Year. There was no relation between this correspondence and the most recent proposals of M. Debré.

Mr. Emrys Hughes: How does the Prime Minister explain that West Germany, although she lost the war, is lending us money and is in a better financial situation than we are? Is it because Germany is spending less of her national income on armaments?

The Prime Minister: It is a fact that Germany has been spending a lower proportion of her national income on armaments than has this country, although with the defence proposals which have been endorsed by the House, our percentage will fall to an equivalent of that of similar countries in Western Europe. Other big factors have been not only that Germany has had a continual inflow of refugees from East Germany but also that after the war, because of the damage, the West Germans carried through an enormous programme of reinvestment, rebuilding and modernisation. Some 20 years later we are only beginning to catch up with the investment in and the modernisation of British industry.

TANKER AND CARGO VESSEL (COLLISION)

Mr. Alan Lee Williams (by Private Notice): Mr. Alan Lee Williams (by Private Notice) asked the Minister of Transport whether he will make a statement on the collision between a petrol tanker and a cargo vessel at Crayfordness on the River Thames in the early hours of this morning.

The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Neil Carmichael): My right hon. Friend has asked me to reply.
The collision occurred in patchy fog at 12.30 a.m. at Erith Rands, just off Crayfordness, between a 10,500 ton Japanese cargo vessel and a small 350 ton motor tank barge. The Japanese vessel suffered superficial damage, but the barge was overturned. Of the barge's crew of five, three men were picked up, but two are still missing.
The tank barge was carrying 380 tons of motor spirit, but, apart from over-
turning, the vessel suffered only superficial damage and there was no fire or explosion. She has since been beached. A small amount of petrol escaped, but this would not cause any pollution because in view of its nature any escaping fuel would have quickly dispersed and evaporated. The fire service and the port authority's pollution officer are at the scene of the accident. Salvage experts expect to right the barge within 24 hours.
My right hon. Friend the President of the Board of Trade has ordered an immediate preliminary inquiry into the incident under the Merchant Shipping Act, 1894.

Mr. Williams: Is my hon. Friend aware that some anxiety arises from the fact that a number of the small tankers do not carry radar? Can he confirm whether this ship was in receipt of radar? Can he say whether there is any danger at all in the Rainham area as a result of seepage of petrol?

Mr. Carmichael: I have no details about the radar. The preliminary inquiry will certainly find out and will let the Board of Trade know. My hon. Friend asked about the danger. We understand from the fire authorities that there is little danger, but as a precaution they have stopped the welding which was going on in a nearby ship further down the river.

Mr. Webster: Is the Parliamentary Secretary aware that we on this side of the House wish to express our sympathy with the relatives of those who lost their lives? Will the findings of the inquiry be published? Does not this accident bring to light the danger arising from tankers which suffer such disasters in coastal waters? Is it not time that we reconvened the International Convention for the Prevention of Oil Prevention? Would the hon. Member make a statement on this aspect of the matter, bearing in mind the "Torrey Canyon" disaster?

Mr. Carmichael: This is a slightly different matter from the "Torrey Canyon" disaster. The inquiry which has been ordered by my right hon. Friend the President of the Board of Trade will, I hope, bring to the notice of the Department some of the questions which the hon. Member asked.
The question whether the matter is ultimately made the subject of a public inquiry is one for my right hon. Friend the President of the Board of Trade.

Mr. Murray: My right hon. Friend has given an assurance about the seepage of motor spirit. Can he say whether the authorities further down the Thames, such as Gravesend and Tilbury—bearing in mind that the tide turned about an hour ago and is now ebbing—are taking any precautions, just in case?

Mr. Carmichael: The experts who are on the job dealing with this accident are well acquainted with the facts of the Thames. The salvage officers are there hoping to make an attempt at the first tide to right the barge. The fire authorities, who are also there, and who are experienced in accidents of this kind, are standing by and giving their expert advice. From the advice which we have from the experts on the spot, it seems that everything is being taken into account to avoid any possibility of a spread of this tragic accident.

Mr. McNamara: Will my hon. Friend confirm that, apart from this unfortunate accident, the general run of these petrol spirit tankers is such that they are model craft, well built, and that the danger of seepage from such unfortunate accidents as this is very small?

Mr. Carmichael: That is quite true. The standards of these tankers are renewed from time to time. Such unfortunate accidents as this provide new information which allows my right hon. Friend to stipulate new specifications for them. I can assure my hon. Friend that as much care is taken in these specifications as is revealed to be necessary by use and by such unfortunate accidents as periodically occur.

NEW MEMBER SWORN

Joseph William Ashton, esquire, for Bassetlaw.

Orders of the Day — QUEEN'S SPEECH

DEBATE ON THE ADDRESS

[FIFTH DAY]

Order read for resuming adjourned debate on Question [30th October]:

That an humble Address be presented to Her Majesty as follows:

Most Gracious Sovereign,

We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

Question again proposed.

Orders of the Day — ECONOMIC SITUATION

3.38 p.m.

Mr. Speaker: Mr. Iain Macleod.

Mr. James Dickens: On a point of order. May I ask, Mr. Speaker, whether you have decided to take for a Division the Amendment standing in the names of 53 hon. Members, dealing with the economic situation?—At end add:
but humbly regret that the Gracious Speech fails to reappraise the Government's post-devaluation economic strategy, by mobilising our immense resources abroad to protect sterling and repay our foreign creditors and, thus, to provide for more rapid economic expansion at home, to improve the inadequate rate of investment, to annul the cuts in social services expenditure, to remove prescription charges, to further restrict the export of capital and, above all, to resume full employment.
May I respectfully ask you to consider that this Amendment should be taken for a Division tonight? On a previous occasion—on 7th November, 1967—I endeavoured to persuade you to reconsider your decision to take an Amendment standing in the names of 45 hon. Members, dealing with the economic situation. I then indicated that in the Parliament of 1946 it had been the practice to take back-bench Amendments during the King's Speech of that year. You replied on that occasion that the great issue which prevented you from dealing with the matter in the way in which Mr. Speaker Clifton Brown dealt


with it then was the fact that eight days had then been given to the debate on the King's Speech against six days last years and five days this year.
May I draw your attention to the fact that a reduction in the number of days given to the debate on the Address gravely diminishes the opportunities of back-bench Members to put forward Amendments of this or any other nature? May I also remind you that in the Parliament of 1930, during a six-day debate on the Loyal Address, Mr. Speaker Fitzroy, your distinguished predecessor, accepted for a Division a backbench Amendment moved at that time by Mr. Fred Jowett and seconded by the present Lord Brockway? It was taken to a vote on that occasion.
I feel, too, that the question of the allocation of time for debates on the Address, while an important consideration, is not of crucial significance. I am putting it to you, Mr. Speaker, for your consideration, that there is a very strong case for saying that the amount of time taken up in debates by moving an Amendment and by having a Division on the Amendment at the end of the debate is not in itself significant.
Moreover, Mr. Speaker, I draw your attention to the number of Members who have signed this back-bench Amendment, 53 in all, a very high figure, eight more than the figure last year, a figure exceeded on only three occasions since 1946. I am suggesting to you—

Mr. Speaker: Order. We have an important debate ahead. I am not questioning the hon. Member's right to put the point of order, but I hope that he will do it briefly.

Mr. Dickens: I conclude briefly, Mr. Speaker, by saying that I think there is a very strong case for stating that when over 50 hon. Members signed a backbench Amendment you might wish to consider this as being a qualitatively different matter from other back-bench Amendments commanding lesser support. I should be grateful for your guidance on this very important point of procedure.

Mr. Speaker: May I say, first, that the number of days given to the debate on the Queen's Speech is not a matter for Mr. Speaker.
If I do not rule at length today it is because I ruled last year on this issue very carefully, very thoughtfully and very sympathetically.
The selection of Amendments is a matter of special difficulty for the Chair, and for that reason no subject receives fuller or more careful consideration by Mr. Speaker. Yesterday, after several days of general debate on the Address, I called on the Official Opposition to move their first Amendment, and, as I then stated, I have selected the second Official Opposition Amendment for today's debate. Clearly, only one Amendment can be debated at one time. To enable other Amendments to be debated, it would be necessary, and, indeed, theoretically possible, for the first Amendment today to be disposed of, and the remaining Amendments on the Order Paper could then be called, provided always that we had not reached 10 o'clock.
As the House knows, its practice does not contemplate this process in this kind of debate. It does, however, during the Committee stage on Bills, and even there the process of selection of Amendments has usually to be applied so as to get through the business within the limits of the Parliamentary timetable. As I have previously explained to the House, this practice as followed by the Chair does not prevent the expression of many points of view in the course of a debate, even though only one Amendment, that of the Official Opposition, has been selected. Most of the viewpoints which are expressed in the various Amendments on the Order Paper, including the hon. Gentleman's own Amendment, might have been canvassed in the general debate—indeed, I have already called seven of the hon. Members whose names are attached to the hon. Gentleman's Amendment—and some may still be canvassed by hon. Members who catch Mr. Speaker's eye.
As I reminded the House last November—I quote my own words then:
As one who zealously wishes to protect the rights of minorities in the House, may I point out that this does not mean that Amendments put down on the Order Paper serve no purpose. Although the occasion does not permit their selection, the viewpoints expressed by those hon. Members and their supporters who put them down are stated on the Order Paper. Hon. Members may follow up those viewpoints in debate if they catch Mr. Speaker's eye. I have tried as far as possible, and I shall try today, to see that every point


of view expressed in an Amendment on the Order Paper has an opportunity of expression in debate. "—[OFFICIAL REPORT, 7th November, 1967; Vol. 753, c. 847.]
This, incidentally, I have done this year, and this I shall do today. Mr. Iain Macleod.

Mr. Thomas Swain: On a point of order, Mr. Speaker. My Amendment on the Order Paper, to add, at the end of the Question,
but humbly regret that the Gracious Speech contains no reference to the setting up of an independent inquiry into the costings of the energy-producing industries, with particular reference to nuclear energy and natural gas or to a comprehensive review of the 1967 White Paper on Fuel Policy.
will, no doubt, receive the same Ruling from you—attached to it are the names of a number of hon. Friends of mine and my own name—that it will be dealt with, in your wisdom, through the selection of speakers.
May I respectfully suggest to you that there are more than 50 names attached to the Amendment in my name, but up to now, in this long debate, only two hon. Members have had an opportunity of reflecting the views expressed by 50 hon. Members as stated in the Amendment?

Mr. Speaker: I remind the House that equally difficult to the task of selecting Amendments is the almost impossible task of choosing speakers. I have said before that there are something like 629 points of view seeking expression in the debate on the Queen's Speech. I try to be as fair as I can. Mr. Iain Macleod.

Mr. Iain Macleod: Mr. Iain Macleod (Enfield, West) rose—

Mr. Peter M. Jackson: On a point of order, Mr. Speaker. Would you not agree, Mr. Speaker, that hon. Members were very confused by the Ruling that you gave on the point of order raised by my hon. Friend the Member for Lewisham, West (Mr. Dickens)? Would you please explain to the House the circumstances which would lead you to accept a back-bench Amendment?

Mr. Speaker: No, because that has not arisen yet. Mr. Iain Macleod.

3.46 p.m.

Mr. Iain Macleod: I beg to move, at the end of the Question, to add:
but humbly regret that few of the proposals in the Gracious Speech have any relevance to

the declared intention of strengthening the economy.
The Amendment is a statement of fact which, I should have thought, would claim general assent. It is deliberately drawn wide enough to include as many as possible of the points of view that have been put on the Order Paper, including the one put forward by the hon. Member for Lewisham, West (Mr. Dickens), to which I shall refer in due course.
There is a good deal of ground to cover, and perhaps, right at the beginning, I could say that there are a number of subjects which are of great importance, but which I do not intend to cover in my speech. They include special drawing rights, the question of third country sterling, the important debate now going on about money supply and its importance in the handling of our economy and, except in passing, the Basle Agreement.
We hope very much that it will be possible to have an opportunity—we should prefer in Government time—to debate some of these matters, some of which are not controversial but all of which are of very great interest to the House. Naturally, I shall deal in my speech with some of the matters that have caught the headlines since our Amendment was tabled.
I start, however, by discussing the problem of unemployment. The October figures show—and we are all glad to see it—although a small numerical increase, what may be an important seasonal drop, and that certainly is very welcome indeed. The facts, however, are very rough and must be put bluntly before the House.
During the 13 years in which there were Tory Administrations there were, as I have previously reminded the House, eight months in which the seasonally adjusted figure of the wholly unemployed—which, of course, is the key figure—went over 500,000; eight months in 13 years. The October figure completes the eighteenth consecutive month under the present Government in which that figure has been surpassed. November will be the nineteenth, December will be the twentieth, and so on.
I cannot believe that any hon. Member in any part of the House does not realise the significance of these figures. Clearly, they are the worst since 1940. Month by


month the particular month has been recorded as the worst figure since 1940. These figures call in question, as some Amendments specifically do, the commitment of the present Government to full employment. We recall very well the statement made by the Prime Minister on 20th July, 1966, when almost casually it seemed in response to a supplementary question he let drop the phrase about 1½ to 2 per cent. after all the shake-out and after the redeployment and the rest of it had taken place. There can be no doubt that, in a matter which has been raised by many hon. Members below the Gangway, Sir Leslie O'Brien, when in Rio de Janeiro, thought that he was declaring—and, in my view, was declaring—Government policy.
I will assume for this part of my speech, although I will challenge it later, that the euphemisms offered by the right hon. Lady the Secretary of State for Employment and Productivity for her comment last week are accurate. She said that what had been done by the Government was a touch on the tiller, a slight flexible adjustment here and there. The truth is that up to £100 million is being taken out of consumer demand, that this is a classic exercise of the classic pattern of deflation stop-go, that it is designed to create unemployment and that it is the clearest possible indicator, first, that full employment is no longer a matter of great significance to the Cabinet, and, secondly, that it is really a searing comment upon the scale of deflation to which we have become accustomed that even an expansion of the figure by up to £100 million seems as if it were unimportant.
Now, in October, even after the seasonal change, which I have welcomed, the unemployment figure, seasonally adjusted, is 551,000. The figure in February, 1963, with which hon. Members opposite made such play then and since, was 549,000 seasonally adjusted. Therefore, the position is mildly worse even than at the height of the 1962–63 winter.
This part of my speech at least is non-political. I want to draw attention to the position of the Northern Region. In October, 1968, the total number of unemployed in that region was 4·8 per cent. But the figure for male unemployment was 6·2 per cent. That compares with a total of 4·2 per cent. and a male

unemployment figure of 5·2 per cent.—a whole point less than at present—in October, 1967.
Lord Beeching has challenged the accuracy of seasonally adjusted figures and seems to believe that it is odd that, in two consecutive years after adjustments have been made, the summer figure is higher than the winter. I would have thought that if one ironed out the seasonal fluctuations, in roughly half the years, the summer figure would be higher than the winter because the figures would then be affected by such matters as interest rates, trends of world trade or trends of trade in other countries which are not necessarily directed to factors in this country as to whether it be June or January.
Looking back over the 18 years in which we have had seasonally adjusted figures, I find, as one would expect, that in 10—roughly half—these summers, the seasonally-adjusted figure has been higher than that of both the preceding and the succeeding winter. Perhaps in another debate the right hon. Lady will take up this interesting point. I see no reason to think that seasonally adjusted figures are inaccurate, but the Government cannot have it both ways. They cannot claim that the figures are inaccurate and yet pray in aid an improvement in the figures, as the right hon. Gentleman the President of the Board of Trade did on Friday.
Secondly, I am concerned particularly with the effect on the Northern Region, but, of course, there may be others. I make it clear that I do not think there is any case for general reflation and I am sure that I carry the Chancellor of the Exchequer with me on that. But when we look at some figures in relation to male unemployment in a whole region, there may well be a case for selective regional reflation in such areas, and I ask the Chancellor to turn his mind to one or two possibilities of labour-intensive works, such as minor works, which are always valuable and have a swift effect in mopping up unemployment.

Mr. Arthur Blenkinsop: Is not the right hon. Gentleman aware of the announcement made of works of this nature for the northern area?

Mr. Macleod: Indeed, I am. I am also aware that the latest figures I have given show in that area, in which the hon. Gentleman lives and with which he


is concerned, a continuing and deteriorating trend. I would have thought that he would support me in the case I am putting in this part of my speech.
One of the levers of regulating demand that the Government are supposed to operate is the prices and incomes policy. I find the Government's devotion to this compulsory policy absolutely astonishing. Almost everyone is against it. The Labour Party conference was against it by a majority of 4½ to 1; the Tory and Liberal Party conferences were virtually unanimous in opposition to it. It has been politically disastrous for the Government, and they know that very well.
But the interesting point is: why, in face of: hat, and of the evidence that it does lot work, do the Government go on with it at all? The answer is that they have to. It is not anything as crude as a condition, but it is an understanding that they will pursue this policy and is one of the reasons why the Government have so little room for manoeuvre. After all, if this be a sovereign remedy for us, it is very odd that all the countries which urge it upon us too do not try it for themselves. It would be an excellent thing it the Government would abandon the legislation, since, quite clearly it does not work.
I want to consider the failures of judgment of both the Chancellors of the Exchequer in four successive Budgets. I simply record their hopes and forecasts, year by year. The previous Chancellor of the Exchequer, now the Home Secretary, said, on 4th May, 1965:
I expect to see us well on our way towards balancing our payments in 1965 and completing the process in 1966. "—[OFFICIAL REPORT, 4th May, 1965; Vol. 711, c. 1083.]
On 1st March, 1966, he said:
Our aim is to achieve external balance over a two-year period—that is, by the end of 1966…and we are well on the way"—
same phrase—
to achieving it."—[OFFICIAL REPORT, 1st March, 1966; Vol. 725, c. 1105.]
By 9th September, 1966, the years 1965 and 1966 had been abandoned.
As for 1967, he said:
…on the basis of our revised policies, I am looking forward not merely to a bare balance, but in fact, I hope for a surplus.

In fact, it was one of the largest current account deficits in our history. But on 7th July, 1967, he said:
I still see the prospect of a substantial balance of payments surplus in 1968."—[OFFICIAL REPORT, 7th July, 1967; Vol. 750, c. 1695.]
The present Chancellor has been a little more cagey in his forecasts, but he made himself clear. According to The Times of 26th September last,
Whitehall now expects that this year's balance of payments deficit will exceed £500 million, but a £250 million surplus is expected in 1969. Ministers concede that the post-devaluation programme has slipped six months behind schedule…
This puts an interesting light on the Prime Minister's election pamphlet at Huyton in March, 1966, which stated:
A new Labour Government's action will strengthen our financial position and make sure that never again do we drift into debt.
How did this happen? They were wrong in 1965, 1966, 1967, 1968 and they have altered their forecasts for 1969. In part, it has been a plain refusal to acknowledge the obvious and, in part, it has been a sort of drunken optimism—of always painting everything in the brightest possible light.
To illustrate this, the previous Chancellor of the Exchequer, the present Home Secretary, whom I am glad to see in his place, produced last year's Budget, which we will never forget, in glowing terms. It was all "steady as she goes", with £500 million to £562 million of Supplementary Estimates to follow. The very first question asked in the Third Report from the Estimates Committee was for an explanation of this, and the answer included this remark:
A certain amount of it is probably due to the fact that Estimates were drawn very tightly last year and this emerges from the very large number of comparatively small items that have come in".

An Hon. Member: Cooking the books?

Mr. Macleod: I would not go as far as that. I have called it "drunken optimism". If everything had conceivably gone right—this is the basis on which the figures were submitted—it would have been just possible for those estimates to have worked. But in the light of the facts as we know them, the figure of Supplementary Estimates is not at all surprising.
Exactly the same illustration occurred when the present Chancellor of the Exchequer made his announcement in the summer about the Basle Agreement. He went out of his way to emphasise that it was not a loan. The guidance to the newspapers at the time was that it was unlikely to be drawn on. There was no mention of drawings in the White Paper when it was finally published in October, 1968. But when I asked the right hon. Gentleman a supplementary question on this score he said—this should have been in the White Paper—that 600 million dollars had been made available to us.
I take the judgment of the Governor of the Bank of England on both parts of the Basle Agreement. He said at a bankers' dinner:
Under the agreement the United Kingdom will be assuming a large addition to her burden of overseas debt falling due for repayment within the next ten years. But without an agreement the immediate burden of conversion of sterling balances could well have been so great as to be insupportable, leading to chaos".
That is, in itself, part of the continuing condemnation of the Labour Government. There is not a single important economic action that they have taken since October, 1964, that they wanted to take, whether it was devaluation, any of the deflationary measures, the end of our rôle east of Suez, Basle or their handling—a subject to which I shall come—of what has been called the spending spree. The answer from the Labour Government is always that they could not think of anything else to do. It is their entire failure to keep any sort of options in Government open that has been one of the main criticisms we have brought against these two Chancellors.
There are, in a sense, three policies before the House. There is the policy of the Tribune group, signed by 53 hon. Members, which I can summarise fairly by saying that they would liquidate many of our assets overseas and go for maximum growth and minimum unemployment at home. There is, secondly, the policy of the Government—of devaluation, deflation and stop-go. Thirdly, there is the policy which we have been putting forward consistently in these debates—of direct taxation reductions,

savings boosts and a drive on Government expenditure.
Both the Chancellor and the Prime Minister in recent speeches have said that one cannot call for increased expenditure in any sphere, even if balanced by savings in another, and yet call for lower taxation. That proposition is absolute nonsense. If the economy is at all normal, nothing is easier, and during the 13 years during which we were in power, we reduced taxation rates by £2,000 million a year, and, at the same time, increased in real terms the value of the social services, both local and national.
We know, of course, what has gone wrong since 1964. Growth has disappeared. It is easy to make a calculation, whether one takes the last six years of Conservative rule or the six years of the National Plan, which had a rather similar target, and compares them with what has happened. If we make an allowance for the remaining years, at current prices, assuming a 3·5 per cent. growth rate, between 1968–69 and 1969–70, the difference between the Tory or National Plan proposals, if they had been achieved, and what the Labour Government will achieve is very nearly £10,000 million. That is the cost of Socialism and that has been the cost over these years.

Mr. John Mendelson: In view of the various policies which the right hon. Gentleman says are before the House, and which he has attempted to summarise, would he tell us whether he is still continuing, as he has done for the last two-and-a-half years, to encourage the Government to tread the rocky road of deflation? Where does the Tory Party stand? What policies would the right hon. Gentleman pursue?

Mr. Macleod: Had the hon. Gentleman listened to my remarks, he would be aware of my view on deflation. I said in categorical terms that there is no case for general reflation. I do not urge that. [HON. MEMBERS: "Answer."] I do not believe that there is a case for general reflation. I said—and this is within the recollection of the House—that in some regions, and I identified the Northern Region, there may be a case for selective regional reflation. That is fair, and I stick by it.
I come to the announcement on hire purchase, which is the latest—it is not really the latest, because school meals takes that position—or the penultimate of 40 deflationary statements made in this Parliament. I have an indirect interest in this matter, which, in accordance with the tradition of the House, I declare once more.
The Chancellor will recall that in his Budget speech he considered, and rejected, altering the position in relation to what is called terms control in this sphere. He said that the Budget was concerned with an 18-month to two-year strategy and that to alter terms control would not be compatible with his objectives. Clearly, particularly if we have slipped six months, which is now admitted, we are still in the same time-scale.
It is equally clear that the Chancellor's arguments, which I accepted as valid at the time of the Budget, must be valid today. Thus, would the right hon. Gentleman tell us why, if the main objective is to push production towards exports, he has included furniture in these proposals? Hon. Gentlemen opposite will recall the howl of fury that used to go up from them, and their cries about the young marrieds and the others. They will be aware that there is little export content in this sphere.
As for the motor car industry, I had hoped that it was common ground between the parties that this industry needed a strong home base from which to operate and from which to continue its brilliant exporting achievements. It is ironic in the extreme that the Government picked to move the Address the hon. Member for Birmingham, North-field (Mr. Chapman), who made a plea on behalf of his constituents which, if he had only known, had already been answered against him.
The question of the restrictions up to £100 million calls into question a large part of the Chancellor's Budget judgment. We have said consistently that he has quite under-estimated the strength of the spending spree in this country. From this Box in January, I urged upon him at the time of the cuts the use of the regulator. Other commentators rightly urged that this should have been used last November at the time of devaluation

itself. To take a typical commentator's argument, Mr. Michael Shanks, in The Times of 18th March, argued that the Chancellor had lost about £200 million by not acting earlier. I agree. In the regulator debate, perhaps our best on the Finance Bill, at least a dozen hon. Members from this side urged the same action upon the right hon. Gentleman.
There were many forecasts. I remember particularly the excellent ones done by the Sunday Telegraph at the time which openly challenged the figures upon which the Treasury were relying. Even three weeks ago my hon. Friend the Member for Lewes (Sir T. Beamish) asked the Chancellor, in a supplementary question:
What is the right hon. Gentleman's answer to the charge that the main reason for the disastrous gap which has appeared between the forecast and the reality was his own blind refusal to face the facts of devaluation during the wild spending spree which followed? "—[OFFICIAL REPORT, 15th October, 1968; Vol. 770, c. 178.]
That was exactly right. That was three weeks ago. The Chancellor, in the Budget, in the regulator debate, on Third Reading of the Finance Bill and in answer to my hon. Friend, still said that consumption was moving as the Government had expected and forecast at the time of the Budget.
There is now a serious situation in front of us. There is something like a flight from money going on in this country. If saving is a habit—it is on this that we have based our savings proposals—then be very sure that spending is equally a habit. We can see clearly the disastrous results of the actions of the Chancellor and his predecessor simply by looking at the savings ratio, what is called the residual calculation. During the last Tory year, it was 8·5 per cent.; in 1965, 81 per cent.; in 1966, 7·8 per cent.; in 1967, 7·6 per cent.; and in the first two quarters of 1968, 7·4 per cent. We have not got—unless the Chancellor has them; presumably he has not yet—later figures, but, clearly, what he has done is cause an alteration in the spending and, therefore, in the saving habits of the people. Very much of this lies at his door because of the lack of judgment in not acting immediately upon devaluation.
I do not wish to pass even briefly from this side of the argument without saying a word on what one might call the brighter side, in particular exports. They were sluggish for some months. Now, they are moving above the main forecast and probably above the higher forecast, and that is excellent news. I welcome every single export order that I see.
On the other hand, the import propensity remains very high, worryingly high, and everybody may have underestimated the natural propensity to import. If so, we have a more serious task before us than we thought. I put to the Chancellor one point which I do not necessarily expect to be answered. I understand that he has—touch wood—closed his mind to import controls, and I agree with him. But is his mind equally closed to any restrictions upon import credits, perhaps on the pattern of the Italian system? I do not know whether he would like to comment on that point.
The facts which I have illustrated showing a continuing attack on the Chancellor's judgment of the spending spree, certainly for the whole of this year, and, for those who were wise enough to see, even from devaluation and November, show clearly that the Chancellor's judgment has failed him in this matter. That is one of our charges. My right hon. Friend the Member for Barnet (Mr. Maudling), commenting on the President of the Board of Trade's statement last Friday, said that it called into question the Budget judgment—I have dealt with the spending spree side of that—and also the position of Ministers. I should like to comment on the second point.
The Times leader yesterday took the view, with which I agree, that the true issue in this matter is not a question of timing. I have made no comment or complaint about that; it is not the business of a Government to time their announcements to suit the Opposition, and it never has been. Nor do I believe that Bassetlaw is the main point at issue. We think that Bassetlaw, which we last won in 1924, was a brilliant result, and we are more than content with the majority of 250 in the next Parliament which it indicated. The real issue is not the by-election or timing. The real issue is whether Ministers told the truth.
I have been to some trouble to find out the precise context of the question which was asked of the First Secretary of State. This was:
Mr. Chairman, in one of today's papers, it is reported that an economic freeze is on the way. A yes or no answer, please. Is it true?".
I quote from the Sheffield Telegraph of the next day:
…Mrs. Castle, speaking at Retford town hall, said briefly and bluntly: ' There is no economic freeze on the way.'
The Times verdict on that is as follows:
It cannot be justified by sematic distinctions between an economic crisis and a touch on the tiller. It was liable to mislead. It has left many people with the impression that it was intended to mislead.
That is one comment, but the First Secretary knows very well that there were others, in much blunter terms, read by about 10 million people in the country. I have them here, but will not read them. I could, by reading them, get on record in HANSARD, in particular, a word which we are not permitted, as hon. Members, to use in debate, but the First Secretary must be clear that if there is nothing to add to her flurry of jejune statements, then judgment must be given by default.
For some, the verdict will be that what she said was misleading, but for many—I am one—the harsher judgment must be the true judgment. We must be clear about the distinction between the two charges. It is the Chancellor's economic judgment which I have challenged. But I believe that the Prime Minister and the First Secretary of State have fallen below the standards of this honourable House. We know—we have always known—that there are incompetent Ministers in this Administration, but I put it flatly on record that the Prime Minister and the First Secretary have shown by their conduct last week that they are quite unfit to hold Ministerial office.

4.20 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins): Mr. Speaker, the right hon. Member for Enfield, West (Mr. Iain Macleod) announced on Friday, via the Evening Standard, that his speech was to be one of his fiercest ever. When he tried to quote me he was reduced to


quoting from The Times. When I read things like that in the Evening Standard I have a pretty good idea where they come from.
If the right hon. Gentleman gave less attention to building up his speeches in advance they might come as less of an anti-climax when he actually delivered them. It is perfectly clear that what he intended to do today was to make a few typical points of destructive, certainly not constructive, criticism—in the early part of his speech not a single word of constructive economic proposal emerged—and then to ride them off at the end with a few sentences of bile against my right hon. Friends the Prime Minister and the First Secretary of State.
But the right hon. Gentleman struck a somewhat more muted note than the right hon. Member for Bexley (Mr. Heath), whom we are all glad to welcome to his first economic debate for seven months. The right hon. Gentleman cancelled the last one altogether and at the one before he had a very pressing engagement, as we remember—[Interruption.] The right hon. Gentleman—[Interruption.]

Mr. Speaker: Order. This is a fierce debate, but it need not be a noisy one.

Mr. Jenkins: The right hon. Member for Bexley—[Laughter.] I do not see why right hon. and hon. Gentlemen should laugh when the name of their Leader is mentioned. This is a very extreme and not altogether respectful reaction from the hon. Member for Peterborough (Sir Harmar Nicholls).

Sir Harmar Nicholls: If the right hon. Gentleman is starting off with personalities, he will have nothing left to which to descend—and he usually goes pretty low—[Interruption.]

Mr. Speaker: Order. We must debate seriously.

Mr. Jenkins: I will get on with the greatest pleasure as soon as right hon. and hon. Gentlemen opposite stop making a noise.
The right hon. Member for Bexley—I hope that I can mention his name this time—appeared on Friday to be whipping himself up into a frenzy across Shropshire. In speech after speech which was reported he accused the Government. Of

what did he accuse them? Apparently of deceiving the House—[HON. MEMBERS: "Hear, hear."]—and of misleading the electors of Bassetlaw. Those were the charges.
The first charge does not begin to stand up. My right hon. Friend the Prime Minister made a holding statement on Wednesday—[Laughter.]

Mr. Speaker: Order. The Opposition spokesman was heard in comparative quiet. [Interruption.] Order. The House will be equally fair to both sides.

Mr. Jenkins: —such as any Prime Minister would have made in the circumstances, such as many have made before, and he said absolutely firmly that we would take measures when they needed to be taken. My right hon. Friend the Leader of the House also made it clear that a statement would be made when it was ready. What my right hon. Friends said was totally compatible with an early announcement such as my right hon. Friend the President of the Board of Trade made on Friday.
On the second charge, I am amazed that the right hon. Member for Bexley had the brazenness even to mention it. Is my memory wrong—[HON. MEMBERS: "Yes."]—or was he Chief Whip in February, 1956, that famous occasion referred to by my right hon. Friend on Friday morning? Then, as the right hon. Gentleman knows, we had a whole range of measures: not merely hire-purchase restrictions, but the abolition of investment allowances, a general credit squeeze and a great number of others. There had been three by-elections, admittedly not the day before, but three days before. Why had these by-elections been held on the Tuesday—a rather unusual day—and not on the Thursday? I will tell the House. Because on the Tuesday, but not on the Thursday, the stale register could be used—with all that was involved in that—with 3,500 postal votes in Taunton alone.
Who moved the Writs for those by-elections, selecting the day with loving care—[Interruption.]—to get the right hon. Member for Taunton (Mr. du Cann) returned by a majority of 657? I think that the right hon. Gentleman may have regretted that at times in the last year. Who moved the Writ selecting this day


so as to use the stale register but the right hon. Gentleman?
I agree with my right hon. Friend the First Secretary of State that the right hon. Member for Bexley has been not only frenzied, but hypocritical. I agree with her that there is not a word to withdraw in her Bassetlaw remarks—[HON. MEMBERS: "Oh."]—or in the Prime Minister's reply in the House or in the answer of the Lord President of the Council. No one in his right senses would think that a Government should announce in advance that they were to lay an H.P. Order—even the right hon. Member for Enfield, West admitted this—and no one with any idea of the meaning of words would call what we have done an economic freeze—[Interruption.]
We will continue to enjoy—and I will come to this a little later—a rapid rate of growth—[Interruption.] Certainly we will, and I will give some figures. Therefore—[Interruption.]

Mr. Speaker: Order. I must ask the House to control itself.

Mr. Jenkins: The third statement with which I agree is that of the Parliamentary correspondent of The Guardian on Saturday, that this has all been a storm in a cup of very weak tea; and not even the right hon. Member for Enfield, West has been able to put any strength into it this afternoon.
I therefore turn to a more interesting point which was made, not unnaturally, by the right hon. Member for Barnet (Mr. Maudling) on Friday morning. He suggested, in what I think for him were uncharacteristically hyperbolic terms, that the alteration of hire-purchase rates
calls into question the whole Budget judgment…"—[OFFICIAL REPORT, 1st November, 1968; Vol. 772, c. 345.]
The right hon. Member for Enfield, West is a bit more cautious. I gather he said that they called into question part of the Budget judgment, thus endorsing that this was a most extraordinary view for the Deputy Leader of the Conservative Party, who shared collective responsibility for all the decisions of the late 'fifties and early 'sixties, to put forward.
Let us look briefly at the record. We had hire-purchase changes in July 1955.

That presumably disposed of Lord Butler's Budget judgment. We had them again in February, 1956, so that disposed even of his after-thoughts in the autumn Budget of 1955. We had them in December 1956, which disposed of Mr. Macmillan's Budget judgment. We had them in May, 1957, only six weeks after that Budget, which disposed of Lord Thorneycroft's Budget. We had them in September, 1958, which disposed of Lord Amory's judgment, and again in October 1958, which doubled disposed of it.
We had them in late April, 1960, three week after the Budget, which treble disposed of it. We had them in January 1961, which quadruply disposed of it. There were four lots in a year, and I always understood that Lord Amory was supposed to be the embodiment of stable policies at the Treasury. Then we had them again in June, 1962, eight weeks after the Budget, which presumably disposed of the judgment of the right hon. and learned Member for the Wirral (Mr. Selwyn Lloyd). Then there was a pause and they were not used by the right hon. Member for Barnet, which, no doubt, explains why he showed such enthusiasm about the subject on Friday morning. We know what a mess his mastery inactivity during 1964 left to be cleared up.

Mr. Nicholas Ridley: If the right hon. Gentleman had been at Bassetlaw last Wednesday night, and had been asked the same questions as his right hon. Friend the First Secretary was asked, would he have given the same answer?

Mr. Jenkins: I have never known anything less productive than being—

Hon. Members: Answer.

Mr. Jenkins: I shall—

Sir Gerald Nabarro: Do not run away from the question; answer it.

Mr. Jenkins: I shall answer the question if the hon. Member for Kidderminster—I am sorry, I always forget that the hon. Member for Worcestershire, South (Sir G. Nabarro) is not exactly where he was 15 years ago. I shall never lay claim to choose the same words as my right hon. Friend did, but I should certainly say without any question that if I had


been asked whether there was to be an economic freeze I should most certainly have said, as she did, that there was not to be one.
The view of the right hon. Member for Barnet is extraordinary, not only in relation to his colleagues, but to the sense of the matter. To suggest that any act of demand management between Budgets is a confession of failure is really the biggest nonsense that I have ever heard. It shows a totally irrational fixation on the annual rite of the spring Budget. There is no magic in April or even in March. Moreover—and I say this frankly and seriously to hon. Gentlemen opposite, some of whom no doubt will greet it with the hoots of uncomprehending laughter to which one begins to get accustomed—all Budget judgments are wrong to some extent. The best one can hope for is that the errors will balance themselves out, and this is partly the case this year.
Some things have gone better than we expected, some worse. Exports are better, imports are worse. Prices are better, at least lower than as expected, and consumption, partly as a result is higher, which in a sense means worse. But productivity is higher and growth is greater. Unemployment was a little worse during the summer, but now shows signs of significant improvement.
The individual Budget forecasts of last March are more open to criticism—I choose my words carefully here—than is usual, not because they were more wrong—rather the contrary—but because they were more explicit. I published much more than had ever been done before, and I intend to go on doing so. I did so because I thought that it would contribute to a more intelligent understanding and debate, and I believe that this has been the case, even though not all hon. Gentlemen opposite show a desire to participate in it. The inaccuracy of individual forecasts, which I never thought could be avoided, in no way alters the fact that the main Budget objective that of moving towards a big and continuing balance of payments improvement, shows every sign of working out.
The improvement in the third quarter on current and capital account combined will, I believe, prove striking. While the individual components

may be different, I think that the underlying trend should also be favourable in the fourth quarter. This underlines the outstanding difference between nearly every previous tightening of hire-purchase controls, and our measures last week.
The previous ones were almost all taken against the background of a deteriorating balance of payments situation. They were reactions to a worsening economic prospect. Last week's measures, on the contrary, were taken against the background of improving trade figures, stronger sterling, and an improving balance of payments prospect. We took them not in a desperate attempt to turn the position round—there was no need for that—but to underpin and accelerate an improvement which was already taking place.
The right hon. Member for Enfield, West tried to make a certain amount of the fact that in my Budget speech I deployed certain arguments against using hire-purchase controls at that time. So I did, but if he assumed that meant that I was throwing away the weapon for all time he is much more foolish than I believe him to be. I said that I thought there had been enough changes for a single year. I did, but that year is now well past. There has been no change for more than 11 months, and as, under successive Governments, and very largely under the Governments of hon. Gentlemen opposite, whose record I have mentioned in this respect, there have been 18 changes in 12 years, this must be reckoned a substantially above-average interval for changes.
I said that it was a measure which worked quickly and that then after six months or so its effect fell away, and that was not the sort of measure for which I was then looking. I then had all the fiscal measures at my disposal, and I was laying the basis of a two-year strategy. Now I want a limited, quick-acting measure, and the fact that its effect will be declining after about six months is no disadvantage. It will enable me to resurvey the position and take decisions one way or the other at the time of the Budget.
I said then that I did not want to put further restrictions on the home market of the motor industry. I did not, at that time. I wanted to see how it


reacted to the increased Purchase Tax, the increased licence duty, and the higher petrol tax. We have seen that. We have seen production up by 16 per cent. in the first nine months of this year compared with the same period of last year. We have seen production for export up by no less than 38 per cent. during this period. We have seen pressure on the industry greater than at any time since 1964. We have seen long waiting lists for cars, both at home and abroad. We have heard Sir George Harriman, whose most revealing remark was quoted by my right hon. Friend on Friday.
The motor industry chiefs are singing a different note now. They always do whenever their home market is squeezed. Let us not forget that Sir Donald Stokes, for whose industrial leadership I have the greatest respect, said on the evening of Budget day that he could see "practically no future in the motor industry"; the Budget, he thought, was un-realistically harsh. An increase in 16 per cent. in production and 38 per cent. in exports is not bad for an industry with no future. I have not the slightest doubt that without the Budget measures the industry would never have achieved its export performance in recent months and that would have meant much harsher measures this autumn, for we just cannot afford a motor industry of anything like its present size, unless it is very strongly export orientated.

Captain Walter Elliot: The right hon. Gentleman is quoting a percentage figure for increased exports. Is this a percentage of value or of volume? If it is of value, what is the volume?

Mr. Jenkins: It is of volume, which, I think, underlines the force of my case.

Captain W. Elliot: What is the percentage of volume?

Mr. Jenkins: This is volume. I have given the percentage of volume.
Sir Donald Stokes, I believe, was wrong in March and I believe that his fellow motor chiefs are wrong today. I have a high respect for the motor industry and a great interest in it, for my constituency is very much dependent upon it. But I do not believe that the industry need fear this change. Sir George

Harriman's remark on 28th April is well worth repeating:
Our dealers abroad are crying out for cars and our order books are full for months to come. Our problem is to turn out the vehicles fast enough.
It is suggested that the industry itself does not allow home demand to influence its level of export supply. Even assuming that this were wholly so—I am bound to say that I feel some scepticism about it—it ignores an important factor, which is the level of our car imports. Their share of the home market was 9·5 per cent. in August, compared with 7·3 per cent. in the first quarter and 7·6 per cent. in the second.
A rise here has a bad effect on our import levels. Inevitably, also, it causes our own manufacturers to be constantly looking over their shoulders at the home market, when they should be concentrating on the export drive. The new restraint will bite at least as hard on imported models as on home-produced ones.
Some of the other considerations apply to the other categories of goods involved. The motor industry has not been singled out. Of the estimated reduction in hire-purchase debt it will provide only 50 per cent. of the total. Furniture and other durables will provide the rest. In almost all cases demand has been strong recently and in most there is a substantial import content.
This leads me back to another false assumption, as I believe it was, underlying part of the speech of the right hon. Member for Enfield, West. If it was right to do this now, he implied, it must have been wrong not to have done it at the time of the Budget. This is false, for two reasons. The first is that it is nonsense to expect that what is necessary in early November should always be apparent in March. This, if accepted, would be a recipe for almost complete immobilism, and this is not at all how I see the sensible development of economic policy. Nor is it the way the right hon. Gentleman then saw the situation.
I tried to follow the right hon. Gentleman closely and I apologise if I have got him wrong. He almost stated in his speech that in our debate on the regulator in Committee on the Finance Bill, which, I agree with him, was one of the best


debates we had then, he indicated to me that I ought to have been thinking of using the regulator, that I ought to have been taking more demand out of the economy.

Mr. Iain Macleod: Purely on a question of fact, when I made that reference from this Box it was in the debate, as the right hon. Gentleman will find, in January on the cuts. That is when I first suggested that the regulator might be used.

Mr. Jenkins: Clearly, the right hon. Gentleman knows what is in his own mind, but I do not think that he is right in what he said to the House half an hour or so ago, because he specifically referred to the debate on the regulator during our discussions on the Finance Bill. I remember that he said that he thought that it had been a good debate. That stuck in my mind. He then went on to say, "We then urged the importance of the regulator because we were worried that the Budget objectives would not be achieved".
I remind the right hon. Gentleman that on 13th May, admittedly under some pressure, which is always necessary if one is to get anything approaching a clear statement of economic position out of the right hon. Gentleman, he told the Standing Committee which was considering the Finance Bill that he thought I had gone too far. He said this:
My view is that on the whole the Chancellor has taken too much out of the economy, but I do not propose and I have never have proposed"—
he could have said that bit again—
to identify that more closely, and time alone will tell."—[OFFICIAL REPORT, Standing Committee A, 13th May, 1968; c. 719.]
More important, however, than this is the fact that even if I could have foretold the future with perfect accuracy, which I would never begin to lay claim to, I would still have regarded it as right to have used the hire-purchase control in the autumn and not in the spring. We now have a much higher level of export demand than we had then, one which I believe we can further exploit. The right hon. Gentleman always pays great attention to the unemployment figures, and he spoke about them at great length and in considerable detail this afternoon. To make sure of avoiding any adjustments in

the autumn, I would have had to go in for over-kill in the spring, which I did not do. The inevitable result of an even bigger Budget before the export demand had built up would have been heavier unemployment during the summer change-of-gear period.
That, indeed, would always be liable to be the result of an "annual fixation" carrying with it the view that room must be left in the spring for all eventualities throughout the coming 12 months. Now, however, I believe that the prospects for the economy are such that a growing buoyancy will continue in spite of last week's restrictions.
In this connection, perhaps I may deal with some of the doubts in the minds of some of my hon. Friends. They see this measure, as I believe they see nearly everything else at the present time, as a return to deflation. I do not agree with them. Let us look at some of the main factors. Between August, 1967, and August, 1968, the last month for which we have figures, industrial production rose by approximately 6 per cent. In manufacturing industry, it was up by 7½ per cent. There is every indication that the trend has since continued and perhaps accelerated. As a result, we expect that the figures for growth this year which I gave in my Budget are likely to be exceeded.
Productivity rose fast in the spring and early summer and this contributed to keeping the unemployment figures up. However, the unemployment position is now changing rapidly, and I believe that it is changing rapidly whatever side of the controversy about seasonal adjustment one came down on. Between August and October there was a drop of 34,000 in the seasonally adjusted figure of wholly unemployed. I am convinced that the fall is continuing and probably gaining momentum. Unfilled vacancies show an equally strong movement. They have been increasing for some time, and are now as high as in the early months of 1964, a period of marked upswing.
All this is in itself very desirable, but my primary duty is to see that this incipient boom is channelled in the right direction—towards exports and investment. Without that, it will do us no good and will endanger future employment prospects more than all the hire-purchase restrictions in the world.
The prospects offered by investment and exports are good. So far, investment has played little part in the pickup, but the indications for the future are very favourable. Industrial development certificate approvals have been rising. The latest investment intentions inquiry of the Board of Trade points to an upswing in the remainder of this year, with a very strong rise in 1969, leading to a volume of outlay up by perhaps 10 to 15 per cent. on the 1967–68 level. The C.B.I. survey fully confirms this, and shows investment intentions nearly up to the two strongest years of the decade.
Exports, on the other hand, have already been rising strongly. In the third quarter, the volume of goods sent abroad was 7 per cent. higher than in the second, and 15 per cent. higher than a year earlier. On the latter comparison, the sterling value increase was much greater—about 25 per cent.—but I think that the volume gives a truer guide.
Nor do I see any reason why the trend should not remain encouraging. We have had a rapid growth of world trade so far this year, and it may be that so far we have been benefiting from this more than from the competitive edge of devaluation. There may be some decline in the growth of world trade over the next six months or so, although the United States market now shows signs of holding up better than was expected a few months ago, and Western Europe should continue to go ahead. If there is an overall decline in export growth, we should be able to compensate for it by a small increase in our share of world trade. Devaluation certainly offers us this possibility, and the reports from individual industries give no reason to doubt its reality.
The general climate is, therefore, one of substantial buoyancy, accompanied during August and September by a rapid move towards the elimination of our deficit. In addition, the Basle agreements have given a new stability to sterling, and October was a month of considerable debt repayment, which we were able to accommodate, combined with a substantial repatriation of capital to the United States on account of the Thorn deal, with only a very small loss to the reserves. It was one of the best months we have had for a considerable time.

Mr. Peter Hordern: Can the Chancellor say how much has been drawn on the Basle agreements?

Mr. Jenkins: No, Sir. It is never the practice to do that, and it would be wrong to retreat from the practice. But I would tell the hon. Gentleman that the drawings have been smaller than I expected when I replied to one of his right hon. Friends some time ago.

Mr. Iain Macleod: How much less?

Mr. Jenkins: Substantially.
None of this means that we do not have a long way still to go. We need, and I am determined to get, not a balance but a very substantial surplus.
I do not think that I need comment on the effusions, for such I think they were, made on this subject by the right hon. Member for Wolverhampton, South-West (Mr. Powell) last night. He said that it was absolute nonsense to talk of needing a surplus. Those effusions were in even sharper contrast with the remarks of the right hon. Member for Bexley last week, when he gave an exaggerated view of the surplus we need, than with my own thought. I think that I can leave the right hon. Member for Bexley to deal, or perhaps not to deal, with the right hon. Member for Wolverhampton, South-West on this point.

Mr. Edward Heath: Will the Chancellor then say what surplus is required month by month to the end of 1971 to repay the indebtedness we have incurred, or, if not month by month, just give the repayment figure to 1971?

Mr. Jenkins: I have said that we need to work towards a surplus at the rate of about £500 million a year as quickly as possible and to keep it there.

Mr. Heath: Answer.

Mr. Jenkins: That is a perfectly reasonable answer. If the right hon. Gentleman does not think that it is an answer, he is entitled to his view. It is the answer I have given, and it is my firm view, to which I stick, that if we achieve it we can, as a result of that and other factors, perfectly well manage our debt repayment. Therefore, I dismiss what the right hon. Member for Wolverhampton, South-West had to say on the matter, and I leave it to the right hon. Member for Bexley.
I am sorry that the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home) is not in his place. I mentioned that I would refer to him this afternoon. I see that the right hon. Gentleman is now entering the Chamber; I congratulate him on his perfect sense of timing. He has recently made some excursions, after a fairly long pause, into fiscal and economic policies. They seem to me to be in the sharpest possible contrast with what the Leader of the Opposition has said.
The Leader of the Opposition has announced that he cannot tell what he will find when he gets into office, and that he must, therefore, be cautious. But such caution apparently does not worry his right hon. Friend the Member for Kinross and West Perthshire, who, after all, speaks with all the authority of an ex-Prime Minister. He can obviously see into the future much more clearly and with much more confidence. He has probably been consulting his old economic advisers, Messrs. Bryant and May.

Sir G. Nabarro: Balogh and Kaldor.

Mr. Jenkins: At Kettering last Monday evening, the right hon. Gentleman announced that in the first month of a new Conservative Government, taxation would be reduced. But the right hon. Member for Bexley said at Blackpool:
That is why I repeat again to you today my pledge: we shall make no promises which we cannot be absolutely certain we shall be able to fulfil.
I wonder who that "we" included. Presumably not the right hon. Member for Wolverhampton, South-West. But equally, presumably, the right hon. Member for Kinross and West Perthshire was included. He surely is part of the magic circle.
I therefore ask the Leader of the Opposition to tell us quite clearly whether his right hon. Friend's statement at Kettering about taxation reductions in the first month of office of a Conservative Government counts as one of his absolutely certain pledges. I willingly give way to the right hon. Gentleman.

Sir Alec Douglas-Home: Sir Alec Douglas-Home (Kinross and West Perthshire) rose—

Mr. Jenkins: Before the Opposition Chief Whip gets too excited, I will, without hesitation, give way to the right hon. Member for Kinross and West Perthshire, and shall be very glad to hear what he has to say, but I very much hope that this will not enable the Leader of the Opposition subsequently to avoid answering the question.

Sir Alec Douglas-Home: Although I do not recollect my speeches quite as well as some right hon. Gentlemen, if I remember correctly I said that the reduction of taxation following the pledge of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) would be one of the first acts of a Conservative Government.

Mr. Jenkins: That quotation, which I read very carefully—[An HON. MEMBER: "From where?"] From the Financial Times. The quotation from the Financial Times was, I repeat:
…in the first month of a new Conservative Government taxation would be reduced.
I would like to know—[An HON MEMBER: "Where is the cutting?"] The cutting is not here, but I checked it extremely carefully this morning. The hon. Gentleman must take serious points. I wrote the words down this morning from the Financial Times of 29th October.
I am sure that the right hon. Gentleman would not deny it if he had said it, but, if he did not say it, he was seriously misreported, and if he was so misreported I imagine that he would like to put it clearly on record, not that he cannot remember what he said but that he did not make this promise.

Sir Alec Douglas-Home: As the right hon. Gentleman recognises, how could one make a promise about the first month of a Conservative Government? If I had said the first months of a Conservative Government I should not be so very far out. What I think I said was "One of the first acts."

Mr. Jenkins: The right hon. Gentleman's remarks, which I assure him were widely read and noted, even if not by himself widely read and noted, gave an impression a great deal more precise than that which he has now given, but I am glad that he has withdrawn or corrected this, and I accept without hesitation what was his meaning.
The Opposition, with a prior build-up of publicity, chose deliberately to concentrate this debate on a narrow party issue which has awakened no echo in the national Press nor I believe in the public at large. They preferred to announce that this was the great issue of the debate. Admittedly, they are not pretending it now, because they allowed the whole thing to die after the speech of the hon. Member for Enfield, West, but the public has only to realise the vast build-up which the Opposition went in for before and their charges against the Government in this respect have fallen completely flat.
I am amazed that the right hon. Gentleman the Member for Bexley, in his speech on Friday—he presumably will not say that he was misreported—allowed himself to get into such a state of frenzy about this. It seemed to me to come most inappropriately from the biggest by-election rigger of all time. At Blackpool, the right hon. Gentleman also announced that the process of democratic government could not survive the return of another Labour Government. He meant by this—"If people do not vote for me they do not believe in democracy". That would be a most dangerous and presumptuous thing for any party leader ever to say.
But it is worse than this, because this piece of smugness and hypocrisy comes from a leader of a party which has presided happily over everything that has happened in Northern Ireland for the past 45 years. If the right hon. Gentleman believes that he alone is the guardian of everything that is important in democracy, and that everything that has happened there has been correct, this is self-deceit on a scale very unusual even for him.

Several Hon. Members: Several Hon. Members rose—

Mr. Deputy Speaker: If the House will give me a moment of silence I will announce the next speaker. Sir Gerald Nabarro.

5.10 p.m.

Sir Gerald Nabarro: The Chancellor of the Exchequer is not blessed with a very good memory. A few days before the 1966

General Election he was chosen by his party to represent Labour on a party political television broadcast in the Midlands. I was chosen by my party to represent the Tory view, against him. [AN HON. MEMBER: "Why?"] Indeed, why not? At least, my constituency elected me by a much larger margin than the right hon. Gentleman's constituency elected him.
The significant thing about our controversy on television, in Birmingham was that the whole of the economic accusations made by the present Chancellor against the Tory Party rested on the financial dyspepsia of 13 years of Conservative rule and the constant chopping and changing which he alleged took place in hire purchase regulations. He claimed that a Labour Government, with extraordinary financial foresight, would never indulge in economic or financial dyspepsia of that kind. They would always anticipate events; they would grasp time by the forelock; it would never be necessary to create unemployment for economic reasons.
So, when the Chancellor today wishes on my hon. Friends and myself the alleged sins of altering hire-purchase arrangements many times during our 13 years of rule he is conveniently forgetting the whole of his own past political history, for he climbed to power on the back of these accusations, that Labour would always do so much better than the Conservative Party. In fact, they have in four years done far worse.
When the right hon. Gentleman twitted my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) with the unemployment figures at 550,000 approximately, the Chancellor conveniently omitted to tell the House that 120,000 of those unemployed have been out of work for more than nine months and have no prospect whatever of finding work under Labour policies in the foreseeable future. They are the deliberately created Labour hard core of unemployment. It is now the policy of the Labour Government to maintain an increased and increasing pool of unemployed for the purpose of serving their economic policies. Not a squeak of denial comes from the benches opposite.

An Hon. Member: They are asleep now!

Mr. Peter Mahon: Mr. Peter Mahon (Preston, South) rose—

Sir G. Nabarro: No, not now.

The Secretary of State for Social Services (Mr. Richard Crossman): Oh.

Sir G. Nabarro: I will give way in a minute. The Secretary of State for Social Services is the most arrogant Member of the House. He never gives way.
I want to address my comments to the hon. Member for Lewisham, West (Mr. Dickens) and his 52 colleagues. I will give way to the hon. Member for Preston, South (Mr. Peter Mahon) when I have finished my remarks to the hon. Member for Lewisham, West. There could not be any more savage indictment of his Government's policy than the wide-ranging and penetrating Amendment to the Motion for the Address which he has put down on the Order Paper:
…that the Gracious Speech fails to reappraise the Government's post-devaluation economic strategy, by mobilising our immense resources abroad to protect sterling and repay our foreign creditors and, thus, to provide for more rapid economic expansion at home, to improve the inadequate rate of investment, to annul the cuts in social services expenditure, to remove prescription charges, to further restrict"—
that is a horrible split infinitive; it ought to be "further to restrict "—
the export of capital and, above all, to resume full employment.
Never in the annals of Queen's Speeches was there a more savage indictment of the policy of a Government than that which has come from the 53 rebels on the benches opposite. Why have they neither the spunk nor the guts to vote against their own Front Bench tonight? Why will they troop obediently into the Lobby behind the Chancellor, in spite of their brave words on the Order Paper? I hope that the hon. Member for Lewisham, West will answer that question in due course. Now I will give way to the hon. Member for Preston, South.

Mr. Peter Mahon: The hon. Member seeks to indict the Government on the score of unemployment. Will he explain how he reconciles his opinions with the fact that I am able to hold my head high in my constituency because unemployment is 1·8 per cent., which is the lowest that it has been for a very long time?

Sir G. Nabarro: Of course, it is patchy. The hon. Gentleman is lucky.

However, he should not boast to his less fortunate colleagues. He should be consoling them and offering to go to their aid. He should be castigating his right hon. Friend the Chancellor for his deliberate creation of these pools of heavy regional unemployment, in various parts of the country, due to failure of economic policies.

Mr. Swain: Is the hon. Gentleman aware that, on numerous occasions when his own party was in office, the hon. Gentleman, who was then the hon. Member for Kidderminster, threatened to abstain from voting or to vote against his Government, but, unfortunately for the House and the country, he took the pill before the moment came?

Sir G. Nabarro: The hon. Member for Derbyshire, North-East (Mr. Swain) was not here in those days. If he cares to do a little modest research, he will find that probably I voted against my own party far more than he and the great majority of his hon. Friends have ever voted against theirs. I do not boast. That is a matter of historical fact. The hon. Gentleman needs a researcher.
I pass, then, to the speech of the Chancellor of the Exchequer, which, as I observed last weekend, having regard to his policies, is characterised by smug complacency and a failure to recognise the horrible post-devaluation drift in our financial and economic affairs.
The right hon. Gentleman talked today of buoyancy in the economy. The whole of our economic troubles under Labour have sprung from our failure to balance our overseas trade. But I must have regard to any improvement which has been secured in our visible trade balances post-devaluation. There is no evidence to support the Chancellor's view that these visible trade balances are improving. Over the first nine months of this year, they are actually worse than they were over the first nine months of 1967.
The official figures obtained from the Board of Trade show that, in the first nine months of 1967, the deficit on the visible trade account was £540 million and that during the first nine months of 1968, the deficit was £547 million. Comparing nine months this year with nine months last year, we are worse off by £7 million, measured as an aggregation


over the nine months. It is true that, at the end of the third quarter, in the month of September, 1968, there was an upturn. That was on a single month's figures. But it is very dangerous to gauge a trend on a single month's trade figures.
Notwithstanding the huge additional taxation imposed in this year's Budget, rising £1,000 million, all the inconvenience which springs from harsh controls and economic and financial measures imposed by the Government during the last year to secure a balance in our overseas trade, and only that factor, all have been brought to nought by the results of the last nine months. I refute for myself and, I hope, for my party the Chancellor's statement that the economy is buoyant and that progress is being made towards balance in our overseas trade. My judgment is at least as good as his. My advice is at least as good as his.
On the occasion of the television broadcast that we did before the last election, when the right hon. Gentleman would not let me speak for longer than a few seconds without interrupting me, so impatient was he, I said, "Stop muttering, Roy", and I reduced him to silence.

Mr. William Hamling: Who is arrogant now?

Sir G. Nabarro: I am repeating what is on the record. The hon. Member for Woolwich, West (Mr. Hamling) probably was electioneering and not listening to the broadcast. If he consults the records, he will find that dialogue between the Chancellor and myself.
I am advised by the business community. The Chancellor is advised by Treasury bureaucrats. Almost unfailingly, the Treasury is wrong in most of its advice.

Mrs. Renée Short: Hear, hear.

Sir G. Nabarro: I am glad to have the support of the hon. Member for Wolverhampton, North-East (Mrs. Renée Short). British industry, trade and commerce are much more likely to be right in their judgment.
I pass now to another factor of our economic affairs which is immensely important. I reminded the Chancellor

earlier of a fact of which, apparently, he is unaware. Whereas, in my former incarnation as hon. Member for Kidderminster I was concerned largely with carpets and motorcar workers, I am much more concerned now with motorcar workers and agriculture. However, I have as many motorcar workers in my constituency as the Chancellor has in his, and I am very concerned about the affairs of the industry, because what he has done in hire-purchase matters will not help my constituents. It will probably make their prospects worse and put quite a lot of them out of work.
The other factor of constituency interest and wide national interest is agriculture. Here, the Government have failed even more than in other spheres. When the Prime Minister made his statement on 16th January about public expenditure, I was fortunate enough to ask one of the first supplementary questions from this side of the House. At a distance of 10 months, it bears repeating. On that occasion I said to the Prime Minister:
Is he aware that British agriculture, in the form of its spokesmen, the N.F.U.s, has estimated imports' saving of £250 million a year given realistic prices instead of the present debased prices? Why did the Prime Minister deliberately omit any reference to agriculture, and its huge import saving potential, from his lengthy statement?"—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1601.]
The Prime Minister then delivered an answer which covered half a column in HANSARD and admitted, in a half-hearted kind of way—as he has few farms in the Huyton division of Lancashire—that there are important import substitution possibilities inherent in a policy of increased output of British food, and he told me to wait until the February Price Review was published.
All the agricultural Members on this side of the House, together with myself, waited for the Price Review, expecting that real incentives would be given to the farming community to raise a great deal more food. In fact, a policy called selectivity was said to be pursued and price advances said to compensate for devaluation, in a total of £52 million, were given. During the ensuing period, farm output has risen hardly at all, but imports of food have risen by nearly 1 per cent. Farm output is said to have increased by 5 per cent. post-devaluation, although I can find little or no evidence of it.
I hope none will deny that if we continue to run a deficit on visible trade account of more than £500 million it is madness to continue to import hundreds of millions of pounds worth of excess foreign food which, largely, could be grown in this country, provided the British farmer is given realistic incentives to produce more and an end is put to the dumping of foreign food on British farmers at artificially low prices.
I hope that the Leader of the House, who is to reply—speaking with all the authority of a former Minister of Agriculture—will tell the House what progress has been made in this policy of import substitution, about which the Prime Minister made such great play on 16th January and which, so far as I can tell, has not been brought to fruition.
I coin the Chancellor's phrase, used in a speech which he delivered some months ago. It is one of those statements of a problem to which no effective solution has been advanced by this Government. He said that exports are inadequate and that imports are excessive.

Mr. Jenkins: When?

Sir G. Nabarro: The right hon. Gentleman does not remember saying it? I have not brought the exact reference with me but that is the effect of his words and I am sure that he will not quarrel with that interpretation of the position that has existed in recent years. Our exports have done very well since devaluation. I do not dispute that. But, we are selling many of our manufactured goods at far too low prices on the world's market as a result of devaluation. Goods which were highly competitive before devaluation have now been artificially debased in price, post-devaluation, and we are selling them too cheaply—notably goods which have a high content of scientific and technical skills, embraced in the sophisticated finished product.
What we have made no progress with, is a reduction in imports by the policy of import substitution, the greatest single contribution to which can undoubtedly be made by British agriculture.

Mr. Peter Bessell: The hon. Gentleman is making a valuable point, and I agree with him, but will he say how he would control the dumping of

artificially subsidised goods on the home market?

Sir G. Nabarro: By two methods; first, by the substitution of a policy of import levies for the present policy of subsidies—my policy would raise the prices of foreign imported food, thereby making it less competitive with home-produced food—and, secondly, by a vigorous implementation of the anti-dumping powers already possessed by the President of the Board of Trade. Those two replies are impeccable.

Mr. Iain Macleod: Mr. Iain Macleod indicated assent.

Sir G. Nabarro: Even my right hon. Friend the Member for Enfield, West is nodding his agreement.

Sir Harmar Nicholls: Does not he usually do so?

Sir G. Nabarro: No, he does not always do so.
Much of my speech has been directed to strong support for the Amendment tabled by my right hon. and hon. Friends, humbly regretting:
that few of the proposals in the Gracious Speech have any relevance to the declared intention of strengthening the economy.
I shall march through the Lobby this evening, in support of that Amendment, with enthusiasm and alacrity. I invite the 53 Socialist rebels opposite to succour me and sustain me in that Lobby, thereby denoting to their own leaders the futility of the Government's policies and the absence of any Socialist content in those policies.

5.26 p.m.

Mr. Douglas Jay: In the characteristically modest speech to which we have just listened there was no practical suggestion whatever. The only suggestion made was that this country should impose import levies on foodstuffs—which would do the utmost harm to our national economy. The speech of the right hon. Member for Enfield, West (Mr. Iain Macleod) contained no constructive suggestion that I could detect. The only constructive suggestion made by the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home) was hastily withdrawn, as I understood it, which means that so far we have not had a very practical


contribution from hon. Members opposite.
Only those who mistakenly regard economic forecasting as an exact science will object outright to the Government's taking further measures to restrain spending this winter. I question to some extent whether it is wise to impose a new limit of a 40 per cent. down payment on cars, because of the pronounced effect that it had on the motor industry on the winter of 1966–67. Even after devaluation a strong case has to be made out for that. But nothing said today has disproved the case for some sort of restraint.
But if it has to be done there is all the more reason for anxiety about the present level of unemployment, especially in development areas. If new curbs are necessary there is surely all the stronger case for more vigorous action than we have already in the development areas. I hope that we shall not become complacent with the present levels of unemployment, and that the disappearance of the phrase "full employment" from the Queen's Speech is nothing more than a variation in the Queen's English. Unemployment, seasonally adjusted, seems now to be tending to fall, but the true figure for October, total registered unemployed, non-seasonally adjusted, is 2·4 per cent. in Great Britain and 7·1 per cent. in Northern Ireland. This is too high by any long-term standards, and represents a continuing waste of national resources. We have fewer people employed in Britain today than we had one year ago or two years ago, and we cannot be content with that.
It means that in the development areas—although the gap between them and the national average has been narrowing in the last few years—the total is still much too high. With the national average at 2·4 per cent., the true figure today in Scotland is 3·6 per cent., in Wales 3·9 per cent. and in the Northern Region, 4·8 per cent.
Do not let us forget that, as I would judge, the real grievance in Scotland and Wales today which provokes all the talk of devolution and all the rest of it is lack of employment comparable to what we have in the South of England. People in those parts of the country would be even

more grateful for more jobs than they are for more Royal Commissions. The Government are, therefore, in my view, quite right to have set aside another £10 million for immediate public investment schemes in the development areas. I hope that they will push on with them quickly and get them going while this winter's unemployment is still with them.
There are, however, two other things which I believe that the Government should do now. The first is to launch a new advance factory programme in these areas and in the pit closure areas in particular—for instance, in West Cumberland, where the situation is very acute. We had four advance factory programmes between 1964 and the summer of 1967, but we have had none launched since. It is fortunate that we started those four when we did in view of the present pit closures and the rundown of the coal industry. The figures show that those programmes have proved a success.

Mr. J. Bruce-Gardyne: In what the right hon. Gentleman says about advance factories, do we not have to bear in mind the fact that a large number of the advance factories announced in the programmes to which he has referred are currently standing empty? There are 15, for example, in Scotland alone. How many more can we have in addition to those standing empty?

Mr. Jay: The hon. Member is quite wrong, as I was just about to explain. The figures show that of the 124 advance factories approved in those programmes, 98 have already been completed, nearly 80 have been allocated to firms and more are being allocated week by week at a quickening rate. The hon. Member's figures are out of date.
I know that the Board of Trade now has what it calls a rolling programme by which a few factories are started in areas where others have been let, but we have had only 12 of these in the last 18 months. It is, therefore, time to launch another major instalment of this successful programme, to get building this winter and to locate the factories in the most needy areas.
Secondly, the Government must, I believe, firmly and emphatically resist the pressure for a relaxation of the industrial development certificate control in the congested areas. There could be no


worse folly, at a moment when development area policy is at last really beginning to yield results, than to weaken the i.d.c. control. We could spend hundreds of millions of £s on grants in those areas, but if we weaken the control we will spend all that money and not produce any effective results.
It is perfectly natural that industrialists in the congested areas—and the Midlands in particular—should periodically protest about these controls and, indeed, that the C.B.I. should do its job and convey those protests to the Government. Many people do not realise what a very large number of i.d.c.s are given in the congested areas in any event wherever a strong case can be made. To weaken further than this and to loosen the control altogether would wreck the recovery which is now beginning in the Northern Region and in Wales and Scotland.
Looking at the Queen's Speech as a whole, I do not criticise the Government—I do not think that even the hon. Member for Worcestershire, South would do so either—for giving the main priority at the present time to national solvency. We all know that this is the first need if anything is to be achieved. I would, however, be far happier about the Speech, and I believe that the Government would recover a good deal more support in the country, if their economic measures were balanced by rather more progress in social reform and, in particular, some advance towards greater equality in the distribution of property. It is perfectly possible to move forward on both those fronts at the same time, and there are some measures aimed at the wider ownership of property—for example, through more saving—which would help industrial effort also.
Since 1964, many improvements have been made by the Government in social benefits, and more are promised, but for a Labour Government which has been in office for over four years it seems to me that remarkably little effort has been made to achieve a fairer ownership of property. Indeed, the ownership of property may even be getting worse. I know that we are rather vaguely promised a wealth tax—quite understandably, not in the Queen's Speech—and that I have always supported. There is, however, an even stronger case for tightening

even more effectively our existing inheritance taxation.
To tax capital which a man has inherited is even more obviously justifiable than to tax what he has saved, which will always be somewhat more controversial. Yet there are still many notorious loopholes in our estate duties, the worst of which I regard as the 45 per cent. rebate on the tax rate which is given for property in agricultural land. I am glad that my right hon. Friend the Chancellor is present, because I sincerely hope that he will not let another Budget go by without putting that one right.
Nevertheless, it is not enough to cream off into the public revenue some of the really large estates. What is equally important and would help the national economy in every way would be to enable the mass of wage earners and salary earners to save regularly in such a way that they can build up some reserves of their own.
At present—I do not know whether hon. Members are aware of this figure—there are 34 million accounts in the Post Office Savings Bank and the Trustee Savings Banks. I apologise for mentioning the Post Office. Yet the number of people owning equity shares, even now, is probably only about 2½ million as compared with 34 million. This means that over 90 per cent. of the adults in our population are saving on a fixed-interest basis, very largely at 2½ per cent., while a minority of under 10 per cent. are being protected against falling money values by sensible investment in equities which show a long-term rise in values. This has always seemed to me to be fairly near to a swindle on the great mass of small savers. It means that we still have two nations in investment.

Mr. Michael Alison: In moving on to this point following his earlier discussion of a tax on accumulated or saved wealth, at what point does the right hon. Gentleman propose to avoid the tax on the sort of wealth which he now wishes to encourage the working man to save in equities, for example?

Mr. Jay: At a pretty high level. I am, however, now making a different suggestion.
With the two Stock Exchange booms of the last 10 years, this two-nation situation may mean that the distribution of


property has got worse. By tar the best and most practical way which I commend to my right hon. Friend the Chancellor to start putting this right—although in addition to other measures such as the hon. Member has mentioned—would be for my right hon. Friend to authorise the Post Office to launch a Post Office Savings Bank unit trust, investing in equities on the general lines of the already successful Trustee Savings Bank Unit Trust.
I know that there are special investment departments in both the Post Office Savings Bank and the Trustee Savings Banks, and these are admirable in themselves, but they are not enough. What is needed is an instrument which would enable the 34 million people now depositing in the Post Office and the Trustee Savings Banks to get the chance of putting small amounts regularly into a reasonable spread of equity shares. Of course, the ordinary City unit trusts cannot supply the complete answer, either, because they do not, like the Post Office, offer a counter in every town where the ordinary man is used, as a habit, to paying in his savings regularly.
I believe that the Chancellor would find support from the National Savings Movement itself for this sort of proposal, and, indeed, it could be operated through the existing National Savings Movement machinery.
It would greatly benefit the small saver—steadily as time went on. It would almost certainly tap new savings as the attraction became generally known, and might divert quite a bit of money from bingo halls, perhaps, and it would offer a new supply of capital to industry. It seems to me that, over time, it would really begin to even out the distribution of property in this country in a way in which almost nothing else can. I really hope that the Chancellor will seriously examine this proposal between now and the next Budget, when, I hope, this will attract him. For unlike most of the dilemmas and nightmares which confront him every day, this proposal ought to help both social progress and economic advance. And, indeed, it might even be popular.

5.41 p.m.

Mr. John Biffen: The right hon. Gentleman the Member for Batter-

sea, North (Mr. Jay) has acquainted the House with an argument he has very persuasively given to a wider public through the Financial Times over recent weeks, and I am fairly certain that more will be heard of it when we come to the Budget. At least there is this consensus between him and this side of the House, namely, the very great anxiety for a very striking recovery of the level of savings in this country. No doubt one of the most disturbing things from the Chancellor's point of view has been the diminution in the amount of our national income now being saved, and the fear that, may be, there has been a very real flight from money and particularly from any money which is invested with Government. For, if this be so, it means the ability of this Government genuinely to borrow on the market is very severely limited indeed. That was certainly the consequence, it seems to me, which was borne out by the I.M.F's consideration of our economy. Whether we like it or not it seems to me these are considerations which are most clearly governing the Chancellor's Budget strategy.
However, I do not want to look ahead, albeit through a glass extremely darkly, at the kind of debates we may be having some months hence. This is a debate about the Queen's Speech and the Loyal Address in reply. There is something felicitous and endurable about the Queen's Speeches, because they always end with the remark that "Other Measures will be laid before you". One knows perfectly well from past experience, with all Governments and particularly this Government, that many of those Measures which dribble out during a year are sometimes because they are thought to be improvements on Budgetary techniques, and sometimes with a sense of some embarrassment; but one thing is certain, that we shall have a whole series of Measures of economic consequence laid before us during the coming 12 months which were not revealed in the Queen's Speech. Indeed, we have already the hire-purchase changes, one of the earliest indications of this financial and fiscal flexibility.
I should like to keep my remarks brief and, therefore, narrow, and touch only on these hire-purchase regulations, and I should like the House to share with me these questions: whether some kind of


restraint is necessary; if so, whether the hire-purchase restrictions were the most suitable form of restraint; whether the timing of the restraint, in particular in strategical terms, was justified; and whether there was some element of deception in the particular enterprise which has excited the House and the country over the last few days.
I must confess, and I do so with some temerity in the physical presence of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), that I do not share his—I thought—qualified gloom about the level of demand in the economy. I would have thought that on the whole we are seeing a fairly booming economy in the United Kingdom at the present time, and I believe that there is a developing picture of rising demand.
Quite a lot of comment has been made about the export performance. What I often think is a more helpful guide is the index of export orders of the engineering industry, which indicates a rising total of exports, and these are statistics of engineering export orders which obviously will become part of a manufacturing process in the months ahead. The index shows that between December, 1967, and August, 1968, the volume of exports has risen from 162 points to 170 points. To my mind, this gives very encouraging prospects of a high level of engineering activity derived from exports during the coming months.
What, I think, is even more important has been the evidence recently made available by the Board of Trade in the Survey of Industrial Building and Approvals. I quote from the Board of Trade Journal, which shows that the average rate of 27·6 million square feet so far this year shows a marked increase of 26 per cent. compared with the 1967 average, and is now considerably higher than at any time in recent years. The point I would emphasise is that these are approvals and this will mean that they will be put into effect in the coming months. I think that this gives one some ground for hoping that through exports and industrial investment the pressure of demand on the economy during 1969 will be quite significant. There are plenty of other indicators, including the C.B.I's own comments on the acute, developing shortage of skilled labour, which point

to the fact that we could be in difficulties in the economy. I am taking into account mentally that public authority capital expenditure is supposed to fall off at the beginning of next year.
Therefore, I have no hesitation in believing that some restraint was absolutely essential, and I am glad that the Government took measures of restraint on consumer expenditure. Indeed, the whole philosophy of their Budget was that domestic consumption had to be restrained.
On the second point, whether or not the hire-purchase regulations were the appropriate form of consumer restraint—that I would favour—I have very great doubt. When the President of the Board of Trade made his announcement in the House on Friday his hon. Friend the Member for Chislehurst (Mr. Macdonald) put what I thought was a particularly pertinent question when he asked:
Why does he not rather seek to restrain the amount of credit available to finance companies so that they may exercise restrictions by distinguishing among the credit-worthiness of their customers?"—[OFFICIAL REPORT, 1st November, 1968; Vol. 772, c. 349.]
There is no doubt that one of the consequences of the hire-purchase regulations is that they bite selectively and harshly, and particularly at the rates which are now imposed, and this was a point touched on by the right hon. Gentleman the Member for Battersea, North. I find that the evidence of the motor industry's economic development committee puts this point particularly persuasively, and I should like to remind the House of paragraph 37 which says:
Since the changes in the hire-purchase regulations are such a significant factor in causing instability in the United Kingdom motor market, particularly in the last three years, it is worth noting that far less use has been made of this form of economic control in the leading Continental countries. In Germany and Italy, except for the period from December. 1964, to January, 1966, there have been no Government regulations on hire purchase.
My fear it that consumer spending will not be so much restrained by hire-purchase regulations as deflected into a pre-Christmas spending spree. We all know that Christmas is a time of high levels of consumer spending, particularly in respect of foodstuffs and beverages. I


do not want to elaborate on this too much, but the emphasis given to foodstuffs consumption pre-Christmas tends to be in what is known as fancy foods, which are very largely imported foods, and in beverages, in respect of which need I say any more than that there is a very substantial degree of importation of wines? Let hon Members think of the enormous boost always given to cigar sales at Christmas. Was there ever an industry so cyclical unless it was the fireworks industry, if I may work in that highly contemporary allusion?
There is no doubt that the import content that could be involved in the deflection of consumer demand deriving from the hire-purchase restraints could give a boost to imports, which on the Chancellor's own reckoning was an area of weakness in his calculations. He emphasised this when he said—I thought it was a rather defensive gesture—in respect of the domestic consumption of motor cars that rather less than 10 per cent. are imported. He was trying to say that it would have some effect on imports. But it seemed to me that the deflection of expenditure that one could foresee arising from this would be to areas where the import content would be much higher than 10 per cent.

Mr. Robert Sheldon: The hon. Gentleman may be right when he speaks about the effect of the hire-purchase restraints on certain industries, but surely there are other cases where there will be nothing like as serious a deflection to Christmas shopping. For instance, when one buys a £300 car one spends only £100, but when one spends £100 on Christmas shopping, that is the total.

Mr. Biffen: I accept that the hon. Gentleman is trying to drag me into the muddy waters of micro-economics to discuss the multiplier effect. I will stick to my own argument. Doubtless he will have the chance to advance the nuances of the multiplier effect. I weigh it and discount it.
I do not want to run away from this. If I say I believe in restraint but do not particularly favour hire purchase, I accept that I must answer the question "What kind of restraint would I have preferred?". I say without hesitation

that it would have been the Excise and Purchase Tax regulator, particularly as that was one which in respect of certain classes of wines, for example, could have had a very clear impact upon at least a sector of our goods which are imported. Who knows, it might have given an opportunity to bring some tax justice so that the unit alcohol content of Scotch whisky would no longer be at a disadvantage compared with imported fortified and table wines. I make that point out of respect for my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne).
If I answer the second of my questions by saying that I believe the restraint was necessary and that it should have come with the Purchase Tax regulator, I should like to consider whether in the broad strategic sense this has been a case of good timing.
The Chancellor was anxious to pretend, I thought in a fairly bland way, that in his world things on the whole move predictably and even if the plusses and minuses were there, on the whole they all balance out and present a fairly satisfactory picture. This is the kind of optimism which, while it might make a good debating speech in the House of Commons, is fearfully frightening for the many commentators who watch the course of economic management of our country, persons outside this House and persons in the International Monetary Fund.
The Chancellor was very anxious to limit the discussion as to whether it had been discussed early in the year or during the Committee stage of the Finance Bill. But the last occasion when the House discussed it was a good deal later, just before it rose, on the Third Reading of the Finance Bill. On 4th July the Chancellor said:
On consumer spending, therefore, the measures have begun to bite, and the effects are beginning to show up in the indicators. These effects should become more pronounced in the coming months as we adjust to a new level of consumer spending".—[OFFICIAL REPORT, 4th July, 1968; Vol. 767, c. 1790–1.]
He was not just wrong; he was dead wrong. It was not as though there were no voices raised in that debate saying, "Now is the time you should be increasing consumer taxation and doing this if only to restore confidence in case there


is again pressure on sterling". Goodness knows, we now realise that that is what has occurred. We realise, for example, that had confidence been restored by some action by the Government in the closing period of July it might not have been necessary to have the financial Munich of the Basle Agreement. If measures had been taken then, I believe they would have obviated the necessity for the measures that we are taking now. I believe that the restraint has been, in the strategic sense, badly timed because it should have been carried out earlier.
My last point is whether there was deception. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) dealt with this admirably when he said that we do not expect in this vale of tears Governments to make unpopular announcements for the benefit of the Opposition. So I will not engage in comparative morality. I think I should win. It is just generosity that is preventing me from doing it. I would merely say that it is all very well but the Prime Minister has need of credibility, particularly in respect of the Rhodesian talks, for example. Anyone reading the Prime Minister's remarks when he was very skilfully examined by my right hon. Friend the Leader of the Opposition can only conclude that on that occasion the Prime Minister showed cleverness beyond the call of intelligence.
I think a much more serious question is whether the right hon. Lady the First Secretary of State and Secretary of State for Employment and Productivity was deceiving herself. My right hon. Friend—I do not blame him—suggested that she knew what it was all about and was pulling a fast one. That is quite a generous, maybe, interpretation. I have a harsher one, and that is that she doss not know what it is all about and that she genuinely believes that the Government strategy is one in which domestic consumption is not expected to suffer as a result of the devaluation strategy. This could be the most serious thing of all.
No one who either heard or read the brilliant speech by the hon. Member for Birmingham, All Saints (Mr. Walden) in the Standing Committee on the Finance Bill will have any doubt about the latent schizophrenia between the Chancellor of the Exchequer and the First Secretary of State. This is very serious indeed, be-

cause only this afternoon the Chancellor of the Exchequer was enumerating some of the advantages, some of the things that had gone well, and some of the things that had gone badly. He said that prices had been kept down. That is a good point. He said that consumer expenditure had gone up. That is a bad point. But they are related. What is a good point on the one hand that has an immediate consequence that is a bad point; it can only give rise to immense puzzlement.
Every time the Government succeed in making a marginal brow beating of the private sector not to proceed with pricing policies which it believes to be in its commercial interest it adds to the Chancellor's difficulties of dealing with the level of domestic consumption. The seriousness of the situation is that the right hon. Lady really believes that it is the rôle of her Ministry and of the Government to bring about a situation in which the public consequences—in terms of public expenditure and private living standards—of devaluation are not to be experienced. Recently, in the presence of the Chancellor, Sir Leslie O'Brien said:
All I will add now is that none of us concerned with these matters"—
referring to the management of the economy—
can afford to make mistake.
It is late in the evening for the right hon. Lady to indulge in her own good-natured self-deception. We all suffer from that. Certainly the Chancellor suffers, and it was unfortunate that, when responding earlier to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), the right hon. Gentleman did not take the opportunity of distinguishing more clearly the fact that he does not share her illusions.

6.2 p.m.

Mr. Joel Barnett: The one thing to be said in favour of the hon. Member for Oswestry (Mr. Biffen) is that in an economic debate he can generally be relied on to speak about economics, which cannot be said of many hon. Gentlemen opposite. I was somewhat surprised to hear him say that he believed in restraint. I always thought him to be a Powellite freebooter, but I am glad to note the change.

Mr. Biffen: I am sure that the hon. Gentleman would not wish to misrepresent me more than is tolerable in these circumstances. If I had chosen this occasion to debate the levels of public expenditure, I would then have chosen to reduce the levels of tax reduction. I would have done my own Morecambe. I was proceeding on the assumption that we have levels of public expenditure which have been decided and proceeded upon and which, unfortunately, cannot be changed. In other words, I was being realistic.

Mr. Barnett: The hon. Gentleman has made my point. He said that he would control this, that and the other. I had thought him to be a freebooter. Now he says that he is a freebooter in controlling the economy, but in his way.
The hon. Gentleman made the interesting comment that the hire-purchase restrictions might have a deflecting effect on consumer expenditure in the pre-Christmas boom. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) corrected him in one regard. Another is that while there is some truth in what the hon. Gentleman said, one must bear in mind that for importers the problem of stocks for pre-Christmas booms does not arise in the last few weeks pre-Christmas because their buying must be done many months before that period. Thus, the dangers of which the hon. Gentleman spoke can be over-stated.
I wish to comment briefly on the hire-purchase restrictions introduced last Friday morning. I completely accept that the decision to announce them on Friday was because of the Bassetlaw by-election. [HON. MEMBERS: "Oh."] I have never doubted that. This is one of the human frailties that I accept in political life and I am surprised that so much has been made of it.
I object, however, to the manner in which hon. Gentlemen opposite have treated this event—the hypocrisy inherent in what has been said by them—because it is obvious, from what the right hon. Member for Enfield, West (Mr. Iain Macleod) said, that he at least accepts that there should not be any reflation. Whether or not there is an amount of deflation in this piece of hire-purchase restriction, it is certainly not so great as to warrant the sort of comments made

by the right hon. Member for Enfield, West and the right hon. Member for Barnet (Mr. Maudling), particularly the latter right hon. Gentleman who said on 1st November:
…his statement"—
referring to the words of the President of the Board of Trade—
calls into question the entire Budget judgment…".
That was as nonsensical a comment as one could get from a former Chancellor of the Exchequer, particularly when he added:
Second, and more serious,…the statement calls into question the personal honour and truthfulness of Ministers…".—[OFFICIAL REPORT, 1st November, 1968; Vol. 772, cc. 345–6.]
That is nonsense, and hon. Gentlemen opposite know it. Such remarks are unworthy of them. The trouble is that remarks of that kind do not just debase and hurt opponents but debase the whole of our political life and standards. They do the maximum possible harm because the public knows that they are humbug. If the decision to which I referred was taken by the Government for the reasons which I have stated, it is possible to criticise it without all this cant and humbug from hon. Gentlemen opposite. They cannot expect to be taken seriously when the best they can do is the sort of speech made by the right hon. Member for Enfield, West today.
The right hon. Gentleman made yet another critical analysis of what has gone wrong, of the guesses that were made but did not turn out to be right and of the forecasts that have proved to be incorrect over a period of time. We should not be surprised when forecasts are wrong. In economic terms, it is surprising if any economist ever gets a forecast right. It is a matter of making variously better or worse-informed guesses. That is all we have had from the right hon. Gentleman.
Anyone making guesses and forecasts about the economy is as likely to be wrong as right or right as wrong. The margin of error must necessitate a regular adjustment of any judgment, budgetary or anything else, and I would have thought that most of the more serious Front Benchers opposite would accept that. As a non-guesser, I am prepared to take the average of all the various


economists' guesses and from that reach the conclusion that we are not going to get a surplus next year of anything like the figures that have been bandied about. I suggest that we will have a surplus next year of about £200 million.
The hazards of forecasting, particularly on the total of current and long-term capital account, are such that it is impossible to be even as accurate as that because fluctuations in capital outflow alone are enough to make impossible any guesses about what will be the total balance, deficit, or surplus in a given year. For example, in 1961 there was a surplus on net capital outflow of £68 million. In 1964 there was a deficit of £370 million. When one is faced with wide variations of this order in capital outflows—let alone what can happen on current account—one appreciates the hazards of making forecasts about a balance of payments surplus or deficit 12 months from today.
My complaint is not that the Chancellor guessed wrong but that we are in danger of not seeing the wood for the trees. We are in danger of becoming bemused by balance of payments deficits and surpluses—so bemused as almost to lose a sense of objectivity.
The Chancellor is constantly repeating the need for a surplus at the rate of £500 million a year. The Leader of the Opposition treated us to a somewhat idiotic statement on 30th October, when he said:
…we need not an improvement so that there is still a deficit of £30 million a month, but a surplus of trade of £40 million a month continuously for at least 40 months; and a surplus of invisibles has to be added to that…"—[OFFICIAL REPORT, 30th October, 1968; Vol. 772, c. 25.]
The surplus of invisibles is running at the moment at a rate in excess of £240 million a year, which means that the right hon. Gentleman was saying that we need a surplus on balance of payments of about £720 million a year for 40 months.
If he really believes that, he is welcome, but I do not know how he can also believe that he can reduce taxation and maintain full employment—which is what the right hon. Member for Enfield, West implied—and increase investment along with a continuous surplus of £720 million a year for 40 months. It was an

incredible statement and I should be interested to hear tonight whether that is still the official view of the Opposition.
Returning to the Chancellor's idea of a steady surplus of £500 million, I do not believe that we could maintain such a target anyway. Indeed, at this point, I am in some agreement with the speech yesterday of the right hon. Member for Wolverhampton, South-West (Mr. Powell). I query the need for such a surplus. It stems from a commendable and understandable desire to reverse the trend whereby we have been living beyond our means, on hire purchase, as it were, but it is possible to go too far the other way.
We are almost approaching the old-fashioned Victorian view of debt, that all borrowing is evil. We certainly borrowed too much as a nation in the past and have spent money which we have not earned, but it does not follow that, as a nation or as individuals, we should take an eternal vow never to borrow again until we have paid every penny we owe. This is impossible any way—

Mr. Hordern: Is not the difficulty that we said that we would repay, and within a very few years?

Mr. Barnett: The hon. Gentleman can make his own speeches about what we did or should have done and what we said or should have said. He is happy making his party political points: I prefer to stick to the economic points.
There is nothing wrong with borrowing—in moderation. Of course, if we were prepared as a nation and as individuals to put off all spending until we had paid every penny of debt, it would be very simple. If the nation would accept that sort of view, we should have no problems. Everyone would exercise self-restraint and Governments would have no problem, but the nation is not prepared to do that. It is prepared to spend some of its earnings of tomorrow today. There is nothing wrong with that. There is no evil in getting some pleasure today from tomorrow's earnings. Many wealthy people think that it is terrible because they have never had that problem, but ordinary working class people are prepared to work harder tomorrow to get some pleasure today. I do not


blame them, and Governments should not blame them.
It is this, which individuals are doing, which adds up to our national situation, but I see nothing evil in borrowing in this way. In practice, anyway, it would be impossible to resist the blandishments of creditors if one wanted to cease all borrowing. An apt comparison in industry is that a creditor does not want a customer to stop all borrowing and buying until he has paid his debts, since that would put the creditor out of business. Equally, he would not want him only to borrow and never to repay, which is what we have been doing as a nation for some years.
His ideal would be a customer whose debts were commensurate with his resources and also of a size which had adequate security and could be serviced. This is particularly apt, because we now have a more realistic exchange rate, we have adequate security for our debts and we can service them. What our creditors would not want and would not allow would be for us to reduce the size of our debts too rapidly. Certainly £500 million a year for 40 months, let alone £720 million, is a rate which other countries would not stand. So we should stop talking about the impossible and set our sights on a smaller target. We should stop talking about massive repayment of debts—[Interruption.] If I am contradicting something which the Government previously said and am therefore saying that they were wrong, I am prepared to do so and to concede to the hon. Member, who is calling from a sedentary position, that the Government were wrong, if that is what he wants to hear.
I believe that we need to work for a small but consistent surplus, and that then we would find, as in industry, that it was not a problem of keeping creditors at bay but of preventing them from lending us more than we wanted to borrow. This is the problem, rather than finding the enormous sums which we hear about to make the massive repayments which would be needed if we were to repay all our debts. This may sound odd to those who know that our nation has not been paying off its debts at all for years, but anyone who knows anything about creditors in industry will know how astonishingly quickly they change from pressing

for repayment to being quite happy that one is in a sound way and allowing one not only to maintain a debt but to increase it.
If one accepts this thesis, it should be taken together with the unexpected stability of the two-tier system of gold, which looks like being more long-term than was ever thought—even though it is not perhaps as stable as one would hope, it seems to be much more enduring than anyone dared to hope when it was introduced—and it should also be seen together with the arrangements made at Basle. Incidentally, the House has been somewhat churlish about that settlement. It has paid no compliments to the Government, and I should like to do so. I believe that there has been some controversy about whether credit should go to the Financial Secretary, the Bank of England, or Treasury officials. I do not mind who it was—I imagine that everyone involved had something to do with it—but that arrangement, from which I hope we will move on, will help us to move away from the impossible previous situation of short-term borrowing, which left us with the volatile debt position we have faced since 1964. I hope that we can move on further from that so that we can get away from the whole idea of sterling as a reserve currency.
With this stability, we can get to a higher rate of growth than we have known for some time, and without any major measures which would simply mean increasing next year's surplus say, from £200 million to £400 million, which would not solve our problems but could create even greater difficulties.
There are still two inhibiting factors on balance of payments. The first is on defence which is still far too high for comfort, particularly in the dollar cost of equipment. When we talk about all the statistics of balance of payments we exclude purchases and dollar payments for defence equipment as if these were irregular payments, but these payments to the United States for equipment, far from being irregular, are very regular. They are likely to become even more regular. They should be included in all our statistics and show how clearly we are spending too much in this field.
The second point on the inhibiting factors of balance of payments is the question of private investment abroad. I


am not in favour of taking over the whole portfolio of investment made as some of my hon. Friends want to do. Without going into too much detail, it would mean replacing creditors who cannot compel us to do what we would not want to be doing at present. But I am very much in favour of action to prevent the continuing outflow of capital. I am sure that in the year 2000 our successors will look at this period of our economic history and think that we have been crazy. On the one hand, we have been restricting growth and causing unemployment here at home because of balance of payments deficits while, at the same time, boosting that deficit on private capital invested abroad.
Look at the figures. In 1958 capital investment abroad, both direct and portfolio, amounted to £310 million. In 1967 it amounted to £424 million. The outflow in the same 10-year period was £3,286 million. This was at a time when we had stop-go in this country and were restricting growth and deliberately causing unemployment. This is absolutely crazy. Capital investment here during that same period amounted to £2,573 million. Nevertheless the net deficit on capital outlay was of a very hefty nature. And looking at all the evidence available, the capital investment in this country, or the greater part of it, would certainly continue if we restricted capital investment abroad because the two things do not necessarily or wholly go hand-in-hand.
I certainly do not argue that we should completely stop capital investment abroad. That is not possible anyway. Reddaway, in his interim report, despite the provisos he made, made quite clear that some investment is more valuable than others, but he went on to give some figures, despite many qualifications in which he found that on average the initial yield on investment of every £100 was just £9. That seems too high a price to pay for restricting growth and causing unemployment at home. I hope that the Government will now give serious attention to the whole question of capital investment abroad.
I conclude that if we can cease our obsession with the need for a surplus at the rate of £500 million and if we can forget prices and incomes legislation—I am happy to see that we seem to be forgetting the legislation on incomes—and if

we can couple this with action to prevent capital outflow, we can look forward to a greater degree of economic stability than has been known for many years.

6.24 p.m.

Sir Henry d'Avigdor-Goldsmid: I think it is almost exactly four years since on this same occasion of the debate on the Address I had the honour of following the hon. Member for Hey-wood and Royton (Mr. Barnett) who then made his maiden speech. I believe I congratulated him on an agreeable speech, as it was, and said that I looked forward to hearing him again. Time has gone on and I do not think I would have praised it exactly in those words if I had then known what was in store for me in debates in the Finance Bill Committee and on the Floor of this House.
The hon. Member said that he did not go so far as his hon. Friend the Member for Lewisham, West (Mr. Dickens) but I think he should examine his speech textually very carefully with the aid of a spy-glass to see if there is any difference between the hon. Members' views. They are sitting very happily together, and, because this is a debate in which many hon. Members want to take part, I do not wish to create any rift between those allies.
In his reply to my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) I do not think the Chancellor of the Exchequer was in his best form, but he at any rate contributed one phrase to our language. There has always been the difficulty, Mr. Speaker, of which you more than anyone else are aware, that we cannot use the word "lie" on the Floor of this House. I believe the late Sir Winston Churchill spoke about a "terminological in-exactitude". Now the Chancellor has produced a new phrase for us. We might also conjugate it like this: I was misreported, you were inaccurate and he—the right hon. Gentleman referring to the Prime Minister—made a holding statement. This is new Parliamentary definition, which we shall be able to use again.
The hon. Member for Heywood and Royton said that we had been rather grudging in our attitude towards the Basle Agreement. On the other hand, my hon. Friend the Member for Oswestry (Mr. Biffen) characterised


it as "a Munich". I feel that I must spend a few minutes on this matter. In 1922 the then Chancellor of the Exchequer, Mr. Stanley Baldwin, in company with the then Governor of the Bank of England, Mr. Montagu Norman, concluded an American debt settlement with the United States authorities which won universal approval. I believe it was criticised at that time only by the Daily Express and Sir Charles Addis, chairman of the Hong Kong Bank. Everyone in the City and in politics thought it an admirable agreement. It provided that we should repay the entire sum borrowed from the U.S.A. for war purposes over 60 years plus 3½ per cent. interest regardless of any payments we might or might not receive from former allies in Europe in this connection. This was not a settlement but a capitulation. I shall try to show that the Basle Agreement is also a capitulation.
I should not particularly wish to dwell on this had I not had the opportunity of hearing at the bankers' dinner the Chancellor of the Exchequer and the Governor of the Bank of England who were freely exchanging tributes to each other's powers of navigation when the ship to which they referred was to all intents and purposes beached on a sandbank. It was an occasion for decent humility, not for boasting. There is nothing to be proud about in a complete surrender.
What was the position before the agreement to which the hon. Member for Heywood and Royton referred in such tender terms? There were holders of sterling here perhaps to a total of £4,000 million—I would not know the exact amount—and technically speaking they were entitled to convert their sterling balances on payment into foreign currency. As the White Paper says, this became acutely difficult in the second quarter of last year when there were substantial withdrawals—depletions, I think is the word—of £230 million in our gold reserves due to this other happy phrase, "diversification of sterling balances".
With £1,000 million nominally in gold, a steady drain of £230 million a quarter could not be tolerated. This, of course, came about primarily as a result of the agreement made by the Chancellor with

the Hong Kong Government who immediately after devaluation came to London and said, "We shall take all our money away unless you give us guarantees for the dollar content of our sterling balances." Again, one does not have figures, but the example of Hong Kong was contagious. All the other holders of sterling balances said, "Now you must give us a guarantee."
What is the agreement? We have drawing rights to repay anything from one-fifth to a quarter of our liabilities, and those rights exist for a maximum of three years. I understand from some of the exchanges across the Floor that they are already being used. When the Chancellor made his announcement in July I said that, while we wished him well in his negotiations, to the extent that they were successful they would represent a transfer of our debts from creditors over whom we had some control to creditors over whom we had no control. The right hon. Gentleman advised me to wait and see. I did, and now we all see the result in the White Paper.
There might have been a tenable argument for telling our creditors that we had a standby of about a quarter of our liabilities, and would therefore give them a guarantee on a quarter of their deposits, and that they should make the best of that. But we have given them a guarantee for 90 per cent. of their deposits. It is clearly physically impossible for us to meet this guarantee from the resources made available to us by the standby. I suspect that the size of the standby—2,000 million dollars—was, roughly speaking, arrived at because in the eyes of the people who knew about our financial situation, which I do not pretend to know about, it was approximately the amount of our as yet uncommitted reserves. In other words, we were pledging our gold reserves in advance as and when the standby is drawn. We have to arrange the repayment over 10 years, in hard currency, to an institution or country over which we have no control.
I wonder what the price of that was. One thing that has taken place to which no one has drawn attention is the end of something we learned about at school. I am sure that the hon. Member for Heywood and Royton is familiar with "the bill on London". We learned at school that one of the great advantages


of being at the centre of a trading empire was that simply by having knowledge of customers abroad one could finance movements of goods from, say, Burma to France, and make the arrangements in London to deal with the shipment. This meant that one could make sure that it was shipped in a British ship and insured with a British insurance company. "The bill on London", which was a classic phrase showing the advantages of a trading empire, has now come to an end. A regulation has been passed that no trade not touching the sterling area can now be financed from London. I do not argue that the system of the bill on London was not open to abuse. I dare say that some people got some extra credit by means of it, but I am sure that there were great advantages to it, both to the British shipping lines and to the insurance companies.
I have a question which I hope the Chief Secretary—whom I congratulate on his new appointment—will ask his right hon. Friend to answer. Was the withdrawal of the facilities of the bill on London a spontaneous action by the London authorities, or was it in any way a condition of the granting of the Basle credit? The whole matter has been treated very quietly. No attention has been drawn to it, and I have noticed no Parliamentary reference to it. I should be very relieved if I could be given an assurance at the end of the debate that this action was taken entirely by our authorities on their own initiative for the advantage of this country.
It is relatively easy to criticise an agreement once it has been made. But this is not an agreement; it is a capitulation. One of the points about which the hon. Member for Lewisham, West (Mr. Dickens) and his friends are concerned is the amount of British investment money now being invested in such places as Australia. British pounds in London have no dollar guarantee, but if a British individual sends £100 to Australia that sum has a theoretical dollar guarantee. In other words, simply by transferring his funds from London to Sidney or Melbourne any capitalist in this country gets what is virtually a dollar guarantee for the funds he has transferred.
The Australians are very sensitive about this. The mere threat of the withdrawal of British investment from

Australia caused severe tumbles in the Australian market. I should have thought that in negotiating with the Australians we might have made a condition that if the guarantee was given, it would not apply to transfers made after such and such a date, but this has not been done. That is why I characterise the deal as a capitulation.
We have given a guarantee which we are not in a position to carry out, and we have given it for the whole of the debt. My hon. Friend the Member for Horncastle (Mr. Tapsell) used the word "humiliating" in a Motion, and I share that view. It is humiliating to give a guarantee which one cannot carry out. And there is a bit more to this. We read in the White Paper that it is hoped that the funds drawn from London on the basis of the standby will be deposited with the Bank for International Settlements at Basle. That is really saying "We do not like the way you keep your books in London." When a company is in trouble and the shareholders complain, there is a demand for an investigation of the accounts.
I can best sum this up by saying that any shareholder who sees that Cooper Bros, are looking into the firm's books had better get out, unless he wants to be caught on the dance floor after the music has stopped. Here we are suffering the special humiliation of the holders of sterling being told, "You can take your money out of London, but you must put it in the Bank for International Settlements", which is only an office. We have now reached the moment when the accountants are looking us over. The next stage can be to put in a receiver.
What will be the situation when my right hon. Friend the Member for Bexley (Mr. Heath) and his colleagues take office in two years' time? The 2,000 million dollar standby will be ex-exhausted, the bill will be coming in. The remedy, in business terms, is to get rid of the board of directors and the chairman, and I hope that the electors will take this to heart.

6.40 p.m.

Mr. James Dickens: The speech of the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), despite its totally unconvincing ending, was a typically thoughtful contribution to our debate which made


some interesting points about the Basle Agreement. I have the gravest reservations about that agreement. In my view, it opens up for this country immense problems for the 1970s. I think it deplorable for a country which has immense assets abroad, now totalling over £11,000 million, to deliberately pursue an economic policy which inhibits growth, creates unemployment and pursues a demonstrably unfair incomes policy for the sake of borrowing £835 million from the Bank for International Settlements. I make my position on that perfectly clear.
Instead, I again urge the Government to take steps to liquidate the dollar portfolio as part of a carefully phased exercise, and to use the revenue from that source to underwrite the more volatile short-term sterling balances, both the official and the unofficial balances, and to start the repayment of debt to the I.M.F. and other creditors.
Tonight, on what is very close to the first anniversary of devaluation, the House turns its attention to the Government's economic policy. I shall not go over the alternative economic policy which I have outlined in some detail on several occasions in the past. I shall summarise the argument and bring various aspects of it up to date, but I shall speak mainly about some of the effects of the Government's policy, particularly on unemployment and the social services.
In passing, I must express my surprise at hearing the hon. Member for Oswestry (Mr. Biffen), for whom I have some respect, congratulate his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) on what I thought was a rather disreputable attack on the personal integrity of some of my right hon. Friends. Those of us on this side who have differences with the Government on economic policy have always confined those differences to matters of policy, and we have never sought to argue the case on personalities.
The right hon. Member for Enfield, West has, alas, left the Chamber. It is a pity that he has, for it will not do for him or any other member of the Opposition to complain about the present level of unemployment. He was a member of two successive Conserva-

tive Cabinets which deliberately put up unemployment to well over 600,000, in the winter of 1958–59, and again in the winter of 1962–63. Moreover, he and his party are backed financially by the those who make up the Industrial Policy Group of British industrialists and businessmen, who are now openly urging the deliberate creation of a permanent pool of unemployed in Britain of 2 per cent. and more. Indeed, they have said in their very first pamphlet that full employment should no longer be regarded as a major item of policy by political parties.
It is time the Opposition came clean on this matter. What level of unemployment do they stand for? Do they support the Industrial Policy Group? Are they in favour of the permanently higher level of unemployment which we are now experiencing in Britain for the first time since 1939, or are they not? The House and the country are entitled to know.
The Government's attitude towards unemployment is an extremely serious matter, too. Full employment is a basic principle of the Labour Party. Yet we are entering the third successive winter with the prospect of 600,000 of our fellow citizens out of work. We on this side find that prospect, as a permanent feature of British economic life, utterly intolerable. We watch with the greatest anxiety the way the Government are reacting now to the many pressures being put on them from sources at home and abroad. For example, the Bank for International Settlements, which arranged to underwrite the official sterling balances in the recent Basle Agreement, in its most recent annual report openly attacked the policies of British Governments in the 1950s and 1960s for creating an over-full employment level of demand, as it put it. If that is not urging a higher level of unemployment now, I should like to know what is.
We have also had certain remarkable statements recently attributed to members of the Government. On 21st September, the Business News section of The Times reported that
Mrs. Barbara Castle said the acceptable"—
note the word "acceptable"—
figure of 2 per cent. unemployed would be achieved 'as our export drive gathers strength'.


I raised this matter privately with my right hon. Friend yesterday, and she went to great pains to deny the report. I fully accept that. Obviously, her position would be one of great difficulty if it were felt that, as a leading member of the Government, she had succumbed to the present propaganda. It was, perhaps, shall we say, a Freudian slip on that occasion.
Not only is the present level of unemployment serious as it is, but it is becoming a chronic feature of the economy. In July, 1966, there were 108,000 adult males aged 18 and over out of work for eight weeks or longer. The corresponding figure on 9th September this year had grown to 265,000. This is intolerably high. Unemployment is not so evident, perhaps, in prosperous Lewisham and South-East London, but for people living in South Wales, the North and Scotland the figures are frightful.
The Government must get rid of the idea that they can run the country at a rate of economic expansion of 3 or 4 per cent. per annum, taking unemployment simply as a balancing factor in the equation. There must be an early return to full employment, and the rate of economic growth must be increased to a level between 5 and 6 per cent., which, taking account of the rapid increases in productivity, is the very least we must attain to bring the level of unemployment down to about 425,000.
But let this be clear. Those of us who have signed the Amendment to the Address on this occasion are saying—I certainly am—that we utterly refuse to accept that there is any advantage for this country in having about 400,000 people avoidably unemployed today or throughout this winter.

Mr. Hamling: Is my hon. Friend saying that: the Government are deliberately creating unemployment and that the total of unemployed now is avoidable?

Mr. Dickens: I am saying that the figure of 550,000 presently out of work contains within it, according to the best estimates which the Department of Employment and Productivity can provide, about 400,000 who are avoidably unemployed. I say also that the Government's policy since 1966, and, I regret to say, since devaluation, has been to pur- 
sue an economic strategy which allows for a permanently higher level of unemployment.
I turn now to the central question of the Government's economic strategy. I supported the devaluation of the pound in November, 1967, as the first step which this country had to take to reappraise our financial position in the world for the remainder of this century and beyond. On the first Monday after the announcement of devaluation, I said at Question Time to the present Home Secretary that devaluation must be supported by a package of measures designed to readjust this country to a new world financial rôle, that it was not only nonsense to go on maintaining the world military rôle which the Government were then seeking to maintain but nonsense also to go on trying to uphold a world financial rôle and, in particular, to put the interests of the City of London in the international economy before the long-term interests of British industry.
Now, the Government have taken some steps to reassess our world position. I give them full credit for their decision in December and January last to effect a military withdrawal from east of Suez in 1971. I said then, and I say now, that that was a step of great historical importance.

Mr. John Lee: But three years late.

Mr. Dickens: But, as my hon. Friend points out, three years too late. If this step had been taken in 1964–65, Britain would now be getting some of the benefits in terms of reduced foreign exchange spending.
It is true initially, after devaluation, the Government tried to go for something like a new economic policy. The House and the country should know that the present Prime Minister was arguing privately for a rate of economic growth of 6 per cent. We have lost all sight of that, at least in 1968. The Bank for International Settlements, the International Monetary Fund, the Treasury, and the financial establishments here, quickly knocked my right hon. Friend off that argument. The consequence is that we have settled for a much lower rate of economic growth this year, with all its accompanying dangers for the country.
What do we put forward as an alternative policy? I have argued this in some detail in the past. Perhaps the most concise statement of our position is contained in paragraph 188 of the recent and wholly admirable Economic Review published by the Trades Union Congress. I should perhaps explain that the General Council of the T.U.C. were arguing in this paragraph about the consequences of reflating the economy. For only by reflating the economy this year, by having a planned reflation of domestic demand and a much higher level of public investment, can we get unemployment down. The paragraph says:
The General Council accepted that reflation of the economy would bring with it risks on the balance of payments front. They reached the conclusion that it would be possible to contain these risks, given determination by the Government to adopt radically new attitudes to the use of such measures as import controls and the use of the dollar portfolio. But, more fundamentally, they took the view that to restrain expansion indefinitely would have been not only to postpone a solution but indeed to aggravate the basic problems facing the economy.
That is the position in a nutshell.
Let us take the first point for which the General Council argues. If the Government were to decide to reflate the economy, to go for a much higher rate of economic growth in 1969, thus encouraging a much higher level of in vestment, particularly in the private sector, thus reducing unemployment, what other steps would they have to take? The very first measure would be to protect the present vulnerability of the £ sterling as an international reserve and trading currency by bringing back the exchange controls which the Tories dismantled in the 1950s; by, if need be, suspending sterling convertibility; by, if need be, too, freezing some of the more volatile sterling balances. Of course, this would cause uproar in the City and outrage in the Treasury.
But these are, from a Socialist point of view, attractive incentives. I put it to my right hon. Friends that short of taking these steps they will be faced with an economic policy over the next decade. With deflation and foreign borrowing as the two main pillars of their policy.
What if we were to take a look at our vast resources abroad? We occasionally get the impression in these economic

debates that we are a poor, weak and enfeebled country. Nothing of the kind. At the end of 1967 Great Britain's external assets amounted to £21,000 million. Our total external liabilities, excluding private investment in this country, amounted to about £14,000 million. Of the £21,000 million of external assets, some £11,000 million was made up of private investment abroad. For example, the portfolio investments have greatly appreciated in value in recent years and now total £4,250 million as against £3,000 million in 1962. Why on earth go to the bankers to borrow money when we have these immense resources available?

Mr. Bessell: I think that the hon. Gentleman has put his case a little unfairly. He says that there are £21,000 million of assets abroad. I agree that this is the figure. There are £14,000 million in terms of liability, excluding the amount in private sector investment. We must add the two together to arrive at a fair assessment, if he chooses to take the second as a basis of credit for his argument.

Mr. Dickens: I would have thought not. Private investment in this country is a liability only in the most narrow bookkeeping sense. No one seriously argues—not, I think, the hon. Gentleman—that there is any question of withdrawal as to the bulk of this money. On the contrary, the present indications are that the trend is going the other way. All our anxieties are about the increasing rate of private investment in Britain.
However, if we were to take a decision to liquidate our dollar portfolio, we should not use it in the way that the Chancellor propounded at the Labour Party conference at Blackpool, in some obscure way to secure a standard of living that we have not earned. That is not a proposal which I have ever advocated, nor have I any recollection of those who urged the proposal on the Chancellor ever arguing this point of view. On the contrary, we would take, concurrently, many other measures to get the balance of payments right. I repeat, we would use the revenue as part of a carefully timed exercise to protect the currency, to buy out the more volatile short-term sterling balances, and to repay some of our foreign debts, with fair compensation to existing holders.
The second thing we would do—here I take up the point made by my hon. Friend the Member for Heywood and Royton (Mr. Barnett)—would be to put a restriction on the outflow of private capital to advanced countries in the sterling area. My hon. Friend dealt with this point at some length. I will confine myself to saying this, and I say it in the presence of my right hon. Friend the Chancellor of the Exchequer. I will give way to him willingly if he has any new statement of Government policy to make in this respect tonight. It is not for the lack of any urging on my part that he has not had the opportunity of doing so earlier.
I asked my right hon. Friend yesterday to review again the Government's policy on the export of private capital from Britain to Australia, South Africa and other advanced countries in the sterling area. Unfortunately, there still has been no response from him, despite the fact that in the first six months of this year we exported £348 million of capital, the highest figure in any six monthly period since records were first kept in this form a decade ago. It is much worse than the figure for the first six months of 1964, which was £220 million; and that, I would remind the Chancellor, was the year of the £800 million deficit.
I recognise that this is a sensitive point. I put it to my right hon. Friend that the days turn into weeks, and weeks turn into months, and this tremendous strain on the balance of payments continues. When does my right hon. Friend intend to take action on this critical matter? I urge him to look at this again as a matter of urgency and to recognise that Britain cannot afford any longer to be a mainstay of capital supply for racialist, Fascist South Africa, on the one hand, or Australia, on the other.
In particular, it is time that the Government paid special attention to the very heavy outflow of capital to portfolio investment in Australia, much of which has been going to Australian gold mining shares, iron ore shares, and so forth. We have now got to the stage where unit trusts are openly advertising as one of their major features that they will invest a substantial proportion of their portfolio in this sort of investment abroad. This nonsense has got to stop, and the sooner it stops the better for Britain's economy.
In the course of this year we on this side of the House have become accustomed, unhappily, to the fact that the Government, in their desire to pander to the most reactionary financial elements in Europe, have whittled away some of the basic fundamental principles of the Labour Party. By "reactionary financial elements" I mean, for example, the Bank for International Settlements which in its last annual report dealt with the British economy and called for a higher level of unemployment, for cuts in public expenditure, for a really effective incomes policy—and we all know what that means—and for new trade union legislation, in terms that sound almost identical to those used by the Tory Party.
I tell the Chancellor that we are getting very tired of watching some of the principles which the Labour Party has always stood for being eroded. In January we had the cuts in education, the disgraceful decision to postpone the raising of the school leaving age, the mean decision to withdraw the milk supply from children in secondary schools, and the contemptible decision to reimpose prescription charges.
I tell my right hon. Friends that when we look over the last year and also witness what happened in the House yesterday over the cuts in the school meals service rightly described in The Guardian this morning as a mean and inept cut designed to meet the Treasury's passionate desire for candle ends, we are bound to ask when these cuts will stop. When will it be recognised that our social services are inadequate, that we are spending less per capita on them than, for example, free enterprise America? When will we see that these are not sacred cows, that they are to many of us basic elements in the policy we were elected to this House to carry out and, above all, they are elements that we are determined to defend? For we are not prepared to see full employment or our social services being lost in a welter of complacent reactionary humbug emanating from the Treasury, from Washington or from Basle.

7.2 p.m.

Mr. Peter Bessell: I hope that the hon. Member for Lewisham, West (Mr. Dickens) will forgive me if I do not follow his argument too closely. I am bound to say in passing, however,


that I find his case in respect of Britain's apparent overseas wealth somewhat difficult to accept.
In the interjection that I made I pointed out that the hon. Member had agreed with the published figures of overseas assets of £21,000 million compared with an overseas liability of £14,000 million if private investment is excluded. His reply was that it was reasonable to exclude the liabilities to the private sector on the ground that there was no chance of its being withdrawn. I think that is true only in so far as Britain remains economically stable. In any case, it is not the kind of accountancy that I should like Her Majesty's Government to follow. I say that, with respect, because I believe that it is a false way of presenting the picture to the House.
I much preferred the argument put forward by the hon. Member for Hey-wood and Royton (Mr. Barnett). I believe he is absolutely right to emphasise that there is no need to talk in terms of surpluses of £500 million and more per annum. I do not think we should set our targets at such unrealistic figures. I believe, with him, that we can as approach the problem of Britain's international and national economic difficulties in realistic terms and at the same time not be afraid of repayment of our international obligations, if necessary over a very long period.
I do not want to dwell on these points, although they are ones that fascinate me, and it is a long time since I had an opportunity to take part in a debate on economics. There are only three matters upon which I want to touch, and I intend to do so briefly as I do not want to deprive other hon. Members of the opportunity of taking part in a very good debate.
First, I refer to the additional hire-purchase restrictions, announced by the President of the Board of Trade on Friday. I accept that it is all right for the Opposition to kick up a hullaballoo about this announcement. I thought, too, there was substance to some of the points that were put forward regarding the manner in which the announcement was made, although I should not be able to accept the argument that was put to the House by the right hon. Member for Enfield, West (Mr. Iain Macleod), who, I

thought, became rather dramatic at the end of his speech in suggesting there had been a deliberate attempt to mislead the House. I certainly acquit the Leader of the House of any such intention on this or any other occasion.
I do not think that it would have been responsible of the First Secretary of State and Secretary of State for Employment and Productivity, upon a public platform, to have answered the question, in the manner in which it was put to the House by the right hon. Member for Enfield, West—"Is a further credit squeeze on the way?"—with other than "No". If she had answered "Yes" there is not the slightest doubt that the following morning there would have been an appalling run on our reserves, and it would have affected the whole of our present economic position.
I think that the right hon. Lady was put in a very difficult position. If she knew—I do not know whether she knew or not—that there was to be an announcement about hire-purchase restrictions the following day, I think that she was still right to answer in the way she did. Whatever may be said about these restrictions, the fact remains that it cannot be said that this is another credit squeeze. It may be an extension of the restrictive measures which the Government have felt it necessary to impose, but it is certainly not by any wild stretch of the political imagination a new credit squeeze.
Having said that, I do not want to leave the subject without emphasising the dangers which I believe exist in any policy which results in over-deflation. I agree with the right hon. Member for Enfield, West that it would be folly at this stage to commence a general policy of reflation, although I think he was right to mention that there are certain areas of the country where a certain amount of reflation could be justified and this is necessary for the general economic health of the country. He mentioned the northern areas. I also would mention the South-West. But, also, I think there is a danger, if we are not to start reflation, in pursuing a policy of deflation which is too keen and which can have certain very serious long-term results.
One short-term consequence of deflation, on the credit side, is an improvement in the balance of payments, which we are already seeing. This follows from


an improvement in our export performance, which all of us welcome. I wish very much that there could be a decline in the amount of our imports. However, I believe that the general trend is one which can cause some quiet confidence.
On the debit side, a policy of this sort inevitably results in something which is repugnant to many of us; an increase in unemployment. It results, too, in a degree of regional hardship which is out of proportion to the rest of the country. It is this which I believe the Government have failed to tackle as realistically as they should in conjunction with their present programme.
If we take the long-term consequences of a deflationary policy, unemployment is not very easily corrected, but, of course, there is also a danger to the Government's own policy of redistribution of labour because, as I have said, the areas that suffer most are the under-developed regions. There is also the problem of the hampering of technological progress. This is something which has not been referred to previously in the debate but I believe the Government should bear it in mind.
The risk to our exports is real. It is all very well to talk about depressing the home market but, even on the Chancellor's figures, given on Friday, there has been no increase in the actual amount of consumer spending at home in the last part of this year compared with the latter half of last year. If we are to embark upon the dangerous course of restricting home spending, one of the risks is not only short-term unemployment but that it will make us less competitive in exports because of inevitable increases in prices which must result from lower rates of production.
These are matters upon which there is a good deal of agreement on both sides. I believe that however finely the arguments may be balanced, there is considerable uneasiness about any policy which puts deflation upon deflation. I would prefer to see the Government at this stage—with full recognition of the problems they confront and of the need to maintain the steady growth of exports and to restrict imports as far as possible—use the regulator or to introduce perhaps for a short time some form of sales tax—and here I speak for myself and not perhaps for my party—both of which

would have immediate consequences and might produce the kind of results the Government believe are necessary to stabilise the economy in the long term.
One thing which bothers me more than anything else about the Government's economic policy is the absence of what I would describe as a long-term strategy. I have said that there is a danger resulting from deflation upon deflation, that there is a danger to the regions which is especially acute in parts of the country like Cornwall. But the most serious danger from the Government's present policy is the absence of the essential, long-term planning of which we have had little evidence either in the Chancellor's speech today or in the speeches he has made on previous occassions.
I know that the Government pin much of their hope upon Britain's eventual entry into the European Economic Community. But, in the present situation, this is not as realistic a hope as some would wish. Again I speak for myself. But whether we do get in or not, one thing is clear: the Government, irrespective of the party they represent, should do some contingency planning.
It is a matter of concern to many hon. Members and to business interests here and in North America that the idea of an open-ended free trade area, not as an alternative to British participation in Europe but as part of a grand strategy of reducing trade barriers, is not being examined more closely either here or, at the moment, in Washington.
A number of studies and investigations have been carried out by responsible organisations in the United States, Britain and Canada. These include various papers which have been published here by the Atlantic Trade Studies Group, together with the extremely valuable contribution by the British-American Committee, and in particular the National Planning Council of America, the Centre for International Studies in New York, and several other less significant bodies.
One thing clearly emerges. Whether or not we get into Europe, it is right that there should be some coherent policy followed by the countries of the Western and, indeed, of the Eastern bloc if they should join with us, which will enable a continuing reduction of tariffs to take place. I do not believe that any member


of my party would disagree with me in saying that the policy of any responsible Government should be directed towards a gradual reduction of tariff barriers. This is the very basis of international good will and trading.
If we look at this proposal for an open-ended free trade area comprising the United Kingdom, the United States, Canada, Japan and E.F.T.A., it is worth looking at the attitude adopted towards it by responsible opinion in the United States. We know that, in this country, there are many adherents to the proposal in commerce, banking and politics.
I would like to mention a few of the organisations with which I had discussions in North America during the summer, since this may serve to show the genuine interest that there is in the proposals. These organisations include the British-American Chamber of Commerce, the National Foreign Trade Council of America, the National Association of Manufacturers, the American Importers' Association, and representatives of companies like General Electric and Macey's Stores together with the International Chamber of Commerce and various banks which it would perhaps be indiscreet to mention here. I also had discussions with representatives of the Department of State as well as with politicians.
One thing is clear to me. There is no absence of sympathy for the broad concept and there is certainly a willingness on the part of responsible opinion in America to look at the proposal, subject to Britain taking an initiative. This is understandable because the Americans do not want to be accused of creating policies for their neighbours. In this situation, as was said to me at the State Department, and as I said in an interjection last Thursday, if Britain wanted this kind of policy to be examined, they would certainly examine it, but the initiative would have to come from us. This is an important factor which the Government should take into account in considering their future economic development of the country in association with our partners.
This does not cut across the intention of Britain to enter the E.E.C. because one hopes that an open-ended free trade

agreement would include the Community. In the same way, I would not wish to imply that there is a desire on the part of the United States to hinder us from pursuing our application to join Europe. On the contrary, it is America's desire to do all it can to assist us in that course if that is our wish. It was made clear to me at the State Department that the present United States Government supports to the full the British policy of applying for membership. But today a Presidential election is being held and, in a few hours, there will be a President-elect elected by the American people.

Mr. Jeremy Thorpe: Not necessarily.

Mr. Bessell: It is true that there may be a hung election, but out of today's voting a new President will emerge, as my right hon. Friend will concede. Surely, when a new President takes office and appoints his Administration, it would be useful for Her Majesty's Government, perhaps privately, and not necessarily in any public sense, to suggest that the proposal for an open-ended free trade area should be investigated in depth. It should be examined in the light of our present economic conditions, of America's own economic problems and of the success of the E.F.T.A. partnership, which would make a particularly useful guide to any policy which might emerge from investigations of this sort. This is something which I would commend to the Government in considering future strategy for Britain's economy.

7.20 p.m.

Mrs. Renée Short: I was interested to hear the suggestion of the hon. Member for Bodmin (Mr. Bessell) that a sales tax should be introduced. I think of this as a horrid Common Market innovation which he would not want. A sales tax has recently been introduced in France. It has had a catastrophic effect on the cost of living, which was already high as a result of the Common Market. To consider the introduction of a sales tax or value-added tax on everything we buy, including food, is something that we could not contemplate; at least, I hope that a Labour Government would never contemplate it.
I was also interested in what the hon. Member for Bodmin said about an open-ended free trade area. Having looked at the Gracious Speech very carefully to see what the powers that be said on the vexed question of entry into the Common Market, and having seen the usual genuflexion in that direction, I say to my right hon. Friends on the Front Bench; is it not time that we stopped this? We are continually taking a humiliating and undignified posture in knocking on a perpetually closed door. We are debasing ourselves in trying to persuade them to take us in when we know perfectly well that neither West Germany nor France wants to take us in. It is not in their interests to let us in, or to make life easier for their main competitor.
To set one group of the Six against another in support of our application causes a great deal of difficulty and embarrassment to them. We have had proof, as my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) said, that the Common Market is an ineffective, capitalist set-up, wasteful in the extreme. We have seen what has happened in agriculture. Some Common Market countries are now in such a state of over-production that they are talking of feeding back dairy produce to cattle and deliberately contaminating food in order to sell it more cheaply. This is obscene and a dreadful indictment of a useless capitalist organisation. Surely we want no part in it.
I ask my right hon. and hon. Friends how they can in their hearts contemplate taking this country into such an organisation. We have an efficient and effective agricultural system, with splendid farmers and growers who ought to be alerted to the danger that lies ahead if we enter the Common Market. My message to the farmers and growers of Britain today is to get lobbying hon. Members opposite. They cannot lobby many hon. Members on this side since not so many represent farming constituencies, but it is high time they started to lobby those hon. Members for whom they voted.
I am sure that the president of the Asparagus Growers' Association, who I am pleased to see rising to make a bow so that everyone shall know I am speaking

of him, will agree that in his pan of the country there are some fine producers and growers. What does the Gracious Speech say about agriculture? Very little. Yet we debated before the Summer Recess the N.E.D.C. report on the possibilities of import savings in agriculture of approximately £220 million. That is not to be sneezed at. We ought to encourage our farmers and growers to make that sort of saving.

Sir G. Nabarro: If the hon. Lady would permit me to intervene, while reaffirming everything I said in my speech earlier, I must correct her. I hold the honorary position of vice-president of the Vale of Evesham Asparagus Association. I explained these matters thoroughly to everyone in the Vale of Evesham before I was elected and I have since looked after them continuously. I am in favour of breaking off the Common Market application now—

Mr. Speaker: Order. We cannot have too many interventions now. All hon. Members here have been sitting all day wishing to speak. Mrs. Short.

Mrs. Short: I stand corrected on the hon. Gentleman's honorary title. I apologise if I made a mistake. What I said about the activity on the benches opposite on behalf of the farmers and growers was not directed to him but to those who have been in favour so far of our application to go into the Common Market.
Our economic situation shows a great deal of improvement in certain directions. I am delighted that our export figures have improved. We need still larger markets, which we must go out and get. There is a great potential for our exports in Eastern Europe and Latin America. We could well take a leaf out of West Germany's book and work harder at finding more outlets for our manufactured goods.
Economic and political considerations should not prevent us from investigating an open-ended free trade area, and I would like my right hon. Friend to deal specifically with this tonight. Why can we not hedge our bets and have an alternative proposal? We are spending a large amount of taxpayers' money, money which has been contributed by millions of people who are, in fact, opposed to


going into the Common Market. The fact that we had a six line whip in the House does not mean that the country as a whole is in favour of our entry. There are many people who are opposed to it for various reasons.

Mr. Stanley Orme: Increasingly so.

Mrs. Short: Increasingly so, since they can see the economic and political disadvantages which will result. It is totally unacceptable to me, as an opponent of entry into the Common Market, that my money should be spent in supporting Common Market front organisations. If this is known, it will be totally unacceptable also to millions of other people. At least a similar effort should be put into examining the alternative. This application has failed. It failed when Mr. Macmillan tried, and this was held against him. It failed when we tried. We must now look energetically and with sincerity into the viable alternative. We cannot go on for ever knocking at the door and claiming that there is no other solution. Here is a solution, here is an alternative, and my right hon. Friends should investigate it.
My right hon. Friend the Chancellor drew attention rightly to the improving export situation. It started off rather disappointingly after devaluation, but the level is now about 17 per cent. above the 1967 level. However, just as I find it hard to understand why the Government continue to knock on the door of the Common Market, I find it extremely difficult to understand their continued refusal to deal with the rising level of imports, which seems to be a permanent feature of the economy.
Why are my right hon. Friends unwilling to take steps to deal with the problem? It is as equally wrong economically as the rising level of capital exports, about which my hon. Friend the Member for Lewisham, West (Mr. Dickens) spoke so eloquently earlier. The West Midlands is the powerhouse of the country, and an enormous number of very good engineering firms export far more to more diversified markets than they did three or four years ago. Their efforts are being undermined by the rising level of imports and the Government's refusal to take steps to deal with it. As

long ago as last May, the National Institute warned the Government to prepare a scheme of import controls. Has it been done? Has thought been given to it in the Treasury or the Board of Trade? If it has not been done, why not?
Obviously none of us would support an overall cut down of imports. It must be selective and, if it is, it can be done without upsetting either G.A.T.T. or E.F.T.A. regulations. Clearly, we cannot clamp down on raw materials which are needed for industry, because that would interfere with the export drive. For the same reason, we cannot cut down on imports of base metals, timber and industrial paper, but we could save on non-essential food imports by adopting the system of agricultural substitution that I mentioned, in which our farmers and growers are only too anxious to co-operate. We could save on imports of manufactured and semi-manufactured goods. We are still importing enormous quantities of useless manufactured goods and other goods which we could manufacture ourselves and so go some way to reducing the present level of unemployment.
After the speeches made by my right hon. Friend the Prime Minister before the 1964 General Election, why do we continue to import fruit machines? Even £20 million a year saved on them would be £20 million on the right side. But when my right hon. Friend the Chancellor was asked about them at the Labour Party conference in Blackpool, he dismissed the matter in one sentence of his reply to the debate on import controls. He said something to the effect that the Government were not prepared to consider it. But that is not good enough when imports have continued to rise for years and have been endangering our tremendous export effort.

Mr. Bessell: The hon. Lady knows that I agree with much of what she says, but, if we are to impose restrictions on imports, how can we hope to increase our exports to the countries from whom we are buying?

Mrs. Short: That is why I say that our controls must be organised very delicately. Imports need a tender touch, and any controls must be selective. I hope to indicate how it could be done without


discriminating against countries or groups of countries, so that no retaliation against us would be called for.
Clearly, we do not want to set up a difficult administrative organisation, because that is not worth the candle. It would whittle away any advantage that we gained, and no one wants to see an army of civil servants employed to operate import controls. There have been proposals which would not entail a great deal of administration. It has been suggested that would-be importers should have to tender for licences in much the same way as Treasury bills are issued. Firms which needed goods most would get them. I am told that the whole system could be worked on a computer and done with the minimum of effort. Alternatively, for a certain period the Government could say that imports must be paid for at the time of ordering and, with the exception of goods essential for industry, allow no bank credits for imports. That would have the effect of cutting down imports and, if we could save £100 million or £150 million plus the savings which are possible in agriculture, a vital contribution would be made to our balance of payments position.
I do not want the House to infer that I think that this is necessarily a simple exercise. I appreciate that it requires much thought. I am asking my right hon. Friends to give thought to it, because it is worth it. The returns would be considerable. The less that we do it, the more we shall continue along this foolish and Gilbertian path of working hard to improve our exports and not getting the benefit of them while we allow imports to rise.

7.36 p.m.

Mr. Nicholas Ridley: The hon. Lady the Member for Wolverhampton, North-East (Mrs. Renée Short) made an impassioned plea for more free trade in the North Atlantic area; indeed, she wanted to join such an association. She spent the rest of her speech adumbrating ways of unfreeing trade and making it impossible for anyone to want us in any free trade area, if she had her way. However, she touched on the problems of the supply of money, and later in my speech I will follow some of her remarks about that.
The central theme of the debate has been the management of demand, and I approach the question from a slightly different angle. It is that of mounting Government expenditure.
Since 1964, the Labour Government have increased total Government expenditure by 50 per cent., from nearly £9,000 million to nearly £13,250 million a year. That includes the Government's investment, which has gone up by nearly half, from £1,100 million to £1,700 million in this year's Estimates.
I do not want to criticise in my speech the mounting Government expenditure. Of course, I criticise it greatly, but that is not the point that I wish to make. My point is that the rising capital investment by the Government has not been financed by any other means than wishful thinking.
The demand management calculations are done in relation to revenue expenditure. It has been assumed for many years that capital expenditure looks after itself because it is borrowed on the market from the public. In fact, the record of the Labour Government shows that about half of the money that they have lent has come from borrowings abroad, about another quarter has come from the banks, and only the remaining quarter has come from the non-bank public. On top of that, massive tax surpluses have had to be applied.
What worries me is that this item of Government investment can only grow. I wrote to all the chairmen of the nationalised industries now in existence, and I have fairly accurately computed the growth of Government investment in the nationalised industries in the next few years. In 1963–64 it was £1,028 million, for the current year it is £1,890 million, and four years hence, on the basis of the existing nationalised industries, it will be about £2,100 million. But the Government are adding many more nationalised industries. We are told that the docks will be nationalised as well as the Transport Bill industries and that many others may follow. The growth of Government capital investment is becoming a very menacing thing.
Non-industrial Government investment is another matter. Schools, hospitals, roads, houses, and the more frivolous amenities like playing fields, swimming baths, town halls and new offices—all


these items of Government capital expenditure are starved. Our road system is very much out of date. Is there an hon. Member who can honestly say that his local education authority is satisfied with its allocation of school building money? Where are the new hospitals? We know that our hospitals are a disgrace. As for the amenities, I had the greatest trouble getting any loan sanctions, or any money at all, for good projects in my constituency.
We find ourselves in a dilemma in wanting to see these good causes provided with the proper resources while, at the same time, keeping down Government expenditure. Many of my colleagues have found this to be a difficult position, which the Treasury Bench, with great skill, has done its best to exploit. It is always throwing back at us the allegation that we are advocating things which will cost more money while, at the same time, we are saying that we want to reduce taxation. But if Government services were properly handled Government capital investment would be a great deal higher—and it is my opinion, supported by the Brookings Institute, that it will be a great deal higher in the next two years—and every kind of public investment must rise considerably.
How are we to finance this? The worst possible way is that by which the Labour Government have financed it. The Home Secretary, when Chancellor, printed more money than any other Chancellor in history. He has earned the title of "Printing Jim". Last year he printed £1,450 million. In the word "print" I include the increase of money supplied by all the different techniques at the Government's disposal. That is the reason for the persistently buoyant demand, and it is incredibly stupid to keep having to increase taxation and hire purchase, and all these little clawbacks with one hand while the Treasury is pumping money into the economy with the other hand.
It is as though we were dealing with a flood by organising a bucket chain. The best course to adopt is to stop the breach in the river bank. We must deal with the matter at the point of supply, and not always try to mop up the water that is swilling around our houses. The policy of creating money to fill the gap should be eschewed by both parties. It results

in inflation. It causes us to impose this unpopular prices and incomes policy, which most hon. Members reject. It causes us to carry out endless deflationary operations to pick up the money which we have just released into the economy. This is no way to finance public investments.
The next source of finance is genuine borrowing. To the extent that the Government can win back credibility and achieve some genuine borrowing from the non-borrowing public we may be able to manage to deal with the problem. But to do the things they would have to do would be more than they could swallow. They would have to abolish the distinction between earned and unearned income; they would have to stop talking about unearned income in such deprecatory terms; they would have to reduce the level of indirect taxation to a point which it could not afford; they would have to put all kinds of savings incentives in the way of the people—and even then they would experience great difficulty, during the transition period from over-taxation to the situation in which people had enough of their own money in their pockets to be able to save.
I hope that all these things will be done, but if they are not, it does not help to attempt to solve the problem of financing Government capital expenditure. So we come back to the need for a solution, provided we do not borrow abroad or, as the hon. Member for Lewisham, West (Mr. Dickens) argued, liquidate our overseas investments in order to spend here. Eating the seed corn is the best way to describe his Amendment and the policy that he announced in his speech.
But in default of this we come back to taxation. This was the reason for the massive increase of £932 million in this year's Budget. It was because the present Chancellor acknowledged that hi predecessor had failed to borrow and therefore had had to go for increased taxation in order to meet the growing total of Government investment. This is intolerable. The levels of taxation are too high. They are impossible to increase still further, so I submit that the Chief Secretary is faced with a real problem. He cannot increase taxation. He cannot, without eating so many words that he would get serious indigestion, increase


savings by a large amount, and he is faced with the need to cut back Government investment. The only way in which he can do this is to reduce the commitments of the Government. The Government: have taken on too many programmes themselves. It is not possible for them to provide 50 per cent.—as it is at the moment—of the nation's services and to tax people enough to find the capital needed for those services.
This is true of modern technological industries like telephones, steel, electricity and gas. Why should taxpayers be asked to produce the capital for these growing industrial concerns? The sum required in respect of the Post Office is £2,000 million and in respect of North Sea gas, £2,400 million over the next three years. These vast sums will have to come from Income Tax.
These large sectors of public control have become too great, and the dilemma which faces the Government can be expressed in the question, "Where shall we make the cut?" The only thing they can do, if they want to regain financial solvency, is to make a cut in some area which gives back the control of the relevant services to private finance. I know that that is a very unpalatable truth for Socialists. It is unpleasant to feel that the Socialist machine is clogged and overburdened. But the main cause of our economic malaise is the greatly overburdened Socialist capital expenditure, which is not matched by finance from any recognisable source.

7.48 p.m.

Mr. Robert Sheldon: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out the dilemma that his own party is in in trying to match its increasingly generous statements with the kind of public expenditure that it wants. Hon. Members opposite find themselves unable to foot the bill. This is the dilemma of hon. Members on both sides of the House. It is a general problem, and one that is likely to stay with us until some time in the future when the economic growth rates that we have seen in the last few months have become a more permanent feature of our economy. It is then that we can start spending.
We have consistently failed to estimate accurately the long-term nature of our

economic problem. It is one of the problems that have arisen with the end of the Empire. The Empire, that we had for so long, brought with it immense financial advantages. These have now gone, and we have not made the transition from a great Empire to a country that is off the shore of Europe, somewhere between Europe and the United States. It is because of this lack of adaptability that we have suffered in the recent past and, unfortunately, it will require from us perhaps rather more effort in the future than even the pessimists have recently estimated.
The advantages, as I see them, which came from the Empire were largely those deriving from the ability to control the economies of so many countries to our advantage. One can say that it came to a head round about the year 1960, which at the time was called Africa Year, when so many countries in Africa became independent and we ceased to control their flourishing economies to our advantage.
This point can be highlighted by comparing over the years the main places to which our exports went. In the inter-war years, from 1920 to 1938, 40 per cent. of our exports went to the Commonwealth. In the 1950s, the proportion had risen to 47 per cent. Last year, however, the figure had fallen to 29 per cent.
If, therefore, the rate of exports to the Commonwealth during the inter-war period was a rate which might reasonably be expected, it can be said that between £500 million and £1,000 million of exports has been permanently lost to us. To me, this is one of the most important factors causing the economic difficulties with which we are faced. It is why further adjustments still have to be made to overcome our difficulties.
Our great advantage in those countries was the ability to organise their tariffs in our favour, to organise trade agreements with countries, particularly in Africa, in our own interest and against the interests of such countries as, for example, Japan, and whereby people from this country organised the buying habits of those countries and were able to place orders with the country which they knew—Britain. They knew the industrialists in Manchester and Birmingham and placed their orders here. Even


at this late stage, we still have an advantage as a hangover from those days. Some of the people in the buying positions in those countries are still friendly disposed towards and know the manufacturers in this country slightly better than they do those of Germany and Japan. However, this advantage is waning. It would be wrong if we failed to assume that we had reached the end of that long decline that went with the end of empire, though some temporary benefit still remains.
The end of empire also produced another great disadvantage for us in the matter of defence. In the inter-war years, from 1919 to 1938, Government expenditure overseas—a large part of which was defence, but there were other items, too—amounted to an average of less than £3 million a year. In 1967, that figure had risen to £449 million. This again is closely tied up with the end of empire, because before the war those countries paid for their own defence, their own embassies and the troops based on their own soil. They also raised their own forces which contributed to the defence of their countries and there were various other offsetting agreements.
That came to an end and the time when the Commonwealth was becoming less of an asset to us was strangely the time when we started spending more on defending it. We therefore had a declining advantage coming from the Commonwealth and an increase in the expense of servicing that Commonwealth.
When we compare our overseas Government expenditure of £449 with West Germany, which makes a surplus, with Japan, which makes a surplus, with France, which achieves an approximate balance, and most other countries which achieve something near to a balance, we see that those trading competitors of ours have enjoyed enormous advantages, whereas we have been saddled with two great burdens. One is the end of our trading agreements based upon the Empire and the other is the defence of that Empire.
The transition is still not complete. It is essential to understand the long-term nature of the problem arising from the end of empire; otherwise we may still fool ourselves that we have discovered the solutions. The point is that so much of our manufactures, even today, are

based on the sale to the Commonwealth of certain kinds of goods. The transition to the newer kinds of markets is still not complete and has yet to be made.
As to the present situation, I believe that the Government, whose decision to devalue I fully supported, have tended to make too much of their rôle in the world monetary sphere also. As an example, things like import quotas could well have been introduced in 1965, or in 1966. They might even be marginally of use today if we were to tot up the balance of advantage on the one side and the balance of disadvantage on the other side and make a rational decision of this kind rather than a decision based on international obligations and its effect on the world community.
We have today a situation in which British trade, although of importance, has nothing like the overriding importance that it had years ago. We are in a world with vastly wider markets and many more countries interested in obtaining the kind of trading patterns that we regarded as almost uniquely ours only a few years ago.
We should not need in these days to think from outdated positions of world power status based on empire. As a result of this kind of thinking, we saw the reluctance to consider devaluation because of its suggested impact on so many other countries, whereas, as we have seen, its impact was nothing like as much as was expected. It has been rather absurd that a country which has depended so much on its world trade was unable to have the right exchange rate. If there is one thing which is crucial for a country which depends upon trade, it is that its rate of exchange should be right. That was the fundamental reason for devaluation.
I see this kind of readjustment coming not only in trade and industry, but also in the attitude of the Government to the real problems before us which arise from the liquidation of the Empire.
In all their economic thinking the Government should test entirely on its merits any argument which is put forward. They should think rather less of its impact on the world at large, and less of the retaliation which our rather reduced rôle makes increasingly unlikely.
The present position of the Government is that they are proceeding on the basis of letting devaluation work. It is not a long-term strategy, but an interim strategy. The strategy is to let devaluation work to restrain consumption as much as one can, to try to keep incomes down as a result of the prices and incomes policy at the same time being realistic and being prepared to settle at best whenever a threat comes to the advantages which we hope to obtain from devaluation.
The policy is that of keeping unemployment at a level of between 2 per cent. and 2½ per cent., both to keep wages down as well as to keep consumption down, as well as to transfer numbers of people from one firm to another. We also see the initiatives being shown to help industries to rationalise, to move towards larger organisations. All these are valuable, though they are limited compared to the economic problems ahead of us.
This policy of the Government is essentially a very simple one, but it is for a limited period. It is essentially a transitional policy to take advantage of devaluation. Soon, sometimes towards the end of next year probably, we will start to look at the long-term strategy, and it is about this strategy that I feel most keenly, because this is the time when we must reassess our attitudes to growth, reassess our attitudes to expansion in the light of how we have seen devaluation work.
There are those who say we should immediately strive for the economic growth which was hoped for when the Labour Government were returned in 1964, but there are some new theorists arising row who are saying that there is no such thing as an understanding of economic growth, that these are theories which have yet largely not been invented, that the Government cannot proceed on the basis of an assumption that there is a consistent theory of economic growth, and that they should proceed cautiously, moving step by step, always aware of the problem of the balance of payments, that for Britain, an old-established industrialist corner of the Anglo-Saxon world, this is our lot, and that there is no theory that can disprove it.
I find this impossible to accept. I believe that no Government can be

neutral in this matter. It may well be that there is no fully satisfactory theory of economic growth—I am sure there is not at the present time—but if the Government must take a view on this, then the view must be optimistic. I myself would sooner fail in an optimism of this kind than take an alternative pessimistic view which underrated the British people because there is no theory that substantially provides an answer.
There is still a case to be put for economic growth based an expansionist policy, based on an expansion leading to increases in productivity. It is essential that economists should come to terms with this although one cannot prove this, and one has only one's personal experience to demonstrate it, from experience at each factory, when there is an increase in production or productivity.
The instance I would like to choose is one which concerns me closely and typifies so much of the way in which industrial changes are made as a result of Government policy. I would cite the occasion when I was in charge of a machine shop which was producing 20 compressor bodies a day. There came a time when things were going well and we were selling well, when the machinery of the company was inadequate to produce more than 20 compressor bodies a day and as a result there was a threatened bottleneck in production.
What happened was something that everybody knows happens. Immediately we got together to see what could be done. In this case the result was that we had a complete analysis of what could be done and how much we could produce as a result of various methods, and we concentrated our thought and attention on that, and production was increased to 30 a day. It is not often that one finds that kind of concentrated attention, but it is not untypical of what happens. Of course, there were consequential savings in costs and also there were certain advantages in design; but that was incidental.
This is the kind of thing that happens whenever the pressures of demand operate upon a factory. I visited fairly recently a large machine tool firm, and one of the things I found was that it is an extraordinarily difficult thing to sell a machine tool on the basis that it is going to improve productivity. It is extremely difficult to sell a machine on the basis


that output will be improved. It is easiest to sell when demands are such that a firm needs increased capacity. That is the time when one can get in with modernising equipment and many great advances in productivity and design. It is when pressure of demand comes upon a firm that the firm produces new ideas, gets new machinery and produces the goods which are cheaper as a result.
The reason I have dealt with this so fully is that I believe that we still need growth based on expansion of demand, and I expect that at the present time there is not likely to be an opportunity of this, mainly because we want to see the effects of devaluation and to make sure that we do not interfere with this in any way. But we have to get our long-term sights organised so that we gain the real performance for which most of us came to this House, and make sure that the prosperity of this country is increased in the way we said it would be increased, in a way which will distribute the prosperity to the people as we said it would be distributed. It is because of this hope that I very much hope the Government's present measures will succeed.

8.8 p.m.

Mr. Peter Hordern: I have, as always, listened with the greatest interest to the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and, in particular, his contribution this evening on the long demise of the Empire, and his thoughts about growth. It was in marked contrast to the speech of his hon. Friend the Member for Heywood and Royton (Mr. Barnett). Generally it is very difficult to put a pin between the two hon. Gentlemen. I thought that the speech of the hon. Gentleman the Member for Heywood and Royton was extraordinary for one who, I understand, is chairman of the back-bench Labour Finance Committee. It was not so much that he agreed with his hon. Friend the Member for Lewisham, West (Mr. Dickens), the Isaiah of the Tea Room, but the fact that he said that not only was it unlikely that we should achieve the necessary scale of surplus on our balance of payments but that it was wrong that we should even attempt to do so.

Mr. Barnett: I should like the hon. Gentleman to quote me correctly. I specifically said I disagreed with my hon. Friend the Member for Lewisham, West (Mr. Dickens), and I said that, on the rate of surplus, I agreed with the right hon. Gentleman the Member for Wolverhampton, South-West (Mr. Powell) that we did not need—indeed, it is wholly wrong—to go for a rate of surplus at £500 million, or, as the Leader of the Opposition was saying, about £720 million a year.

Mr. Hordern: My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) was talking in terms of a floating exchange rate, and I did not hear the hon. Member speak about that.
We are faced with specific commitments, which must be repaid to our creditors by 1975—commitments which have all been undertaken by the present Labour Government. I urge the Financial Secretary to press on the Leader of the House that in his reply he should make it clear that the Government have every intention of honouring the commitments which they have undertaken under the various loan arrangements.
It would be difficult to pick one cardinal error among the very many errors for which the Government have been responsible in their handling of economic affairs, but I suppose that it could be the fact that from the moment the Government took office there has been a dual control of the economy—and it has been dual control not in the sense of a united control but in the sense of a split control. First, we had the right hon. Member for Belper (Mr. George Brown). Then we had the Prime Minister—and I ignore his creature, the Secretary of State at the Department for Economic Affairs. Now we have the Secretary of State for Employment and Productivity. All these have spoken with different voices, and all have contradicted the Chancellor of the Exchequer of the time. One spoke of expansion and another spoke of sacrifice. As to the third, it is impossible to believe that anyone other than the Secretary of State for Employment and Productivity could have replied in that way to the question put at the by-election. She talks of "a


touch on the tiller". In fact, we are faced with precisely the same conditions as those which we endured in the July, 1966, measures, and I do not believe that they could be described as a mere "touch on the tiller".
The job of the Chancellor of the Exchequer has been made almost impossible by his colleagues. Indeed, it is virtually impossible anyway, given the Government's economic policy, for the trouble is that the boat has become waterlogged and it is failing to answer to the tiller at all, and that is the Chancellor's fault. He has always done too little, too late. He should have produced these hire-purchase restrictions almost a year ago, when we urged him to do so. Above all, he should have set about reducing Government expenditure sharply instead of allowing it to rise this year, as it will, by 10 per cent. in money terms.
We have the worst of almost every world—high unemployment, a credit squeeze, stupid restrictions on travel and on the financing of overseas business and a low level of industrial investment. Despite everything which the Government have thrown at commerce and industry, both are making higher profits now, but as yet there is no signs that industry is increasing its investment. Despite the C.B.I. forecast of investment intentions, those who have direct experience of the machine tool industry, as have many hon. Members opposite, know that there is no significant upturn in the level of orders as yet. This makes the situation very serious, because even if investment in manufacturing increases by 15 per cent. next year, it will still be from a very low base, because investment has declined by 5 per cent. in each of the last two years. Mr. Catherwood said the other day that the level of investment in 1969 would certainly be quite inadequate to take up the increase in the volume of exports which we need to produce a £500 million surplus.
That, surely, is the crux of the whole matter. The base from which our exports arise, manufacturing industry, is too small compared with that of our competitors and it is being increasingly overwhelmed by the public sector. Taking the growth of fixed asset formation, for example, the public sector now subsumes about 50 per cent. compared with 44 per cent. four

years ago. I do not take the view—very few people do—that all public expenditure and investment is ipso facto harmful. I merely point out that we cannot export the production of public investment and that it is exports which we need. Yet in order to make room for exports, it is always the private sector which is hammered and never the public sector.
What is so particularly nauseating about the Government's handling of the situation is their refusal to accept responsibility for this situation and also for the methods of financing this high level of expenditure. Not only is the level of Government expenditure too high, both absolutely and proportionately, but the method of financing it relies as much on the printing press as it does on genuine borrowing. It is the Government's refusal to curb the growth of the money supply which has produced these latest restrictions, and much else besides. In the year before the election, up to March, 1966, the money supply increased by over £1,000 million, double the largest increase in any year up to 1960. In the second quarter of this year alone, the money supply rose at an annual rate of 9·9 per cent. I guess that the seminar—I like the word as a description of what took place—between Mr. Polak of the International Monetary Fund and the Treasury was a great deal more practical than it was academic and theoretical. Not that I do not find the academic argument particularly fascinating with the debagging of the neo-Keynesians by the Chicago school.
But however fascinating, there is no need to argue in a vacuum. What is there exists for all to see. For there is another country with more or less the same population as ourselves which over many years has consistently achieved higher production, much higher wages and a smaller increase in costs than we have, as well as a continuing surplus on balance of payments—to such a degree that it has already revalued once and is being pressed to revalue again because of what is described as the German problem. I understand that it is to repay its loans under Marshall Aid.
Surely we can cast aside economic theory and judge by practical experience. This is a country in more or less the same position as Britain and it has made these great achievements by operating a


market economy, as opposed to a centrally directed economy, and a liberal economy as opposed to a collectivist economy. It is a country which has no part at all in its strategy for a prices and incomes policy. It has pursued a strategy of active denationalisation and non-interference in the private sector. It is a policy and country which the Socialist Party in Britain must do their best to pretend does not exist.
For our part, I would say that although Germany is not a country which we need necessarily to emulate, it is a fact that the practices which the Germans follow entirely accord with what a Conservative financial policy should be. On the contrary, the Labour Government have used the economic system of a banana republic—the siesta, the sombrero and manana: "Double your money while you sleep."
I do not know whether the I.M.F. will exert stricter monetary control over this country. What I do know is that the primary fault, the level of Government expenditure, will never be reduced by this Government and by these men. The answer is that both should go.

8.19 p.m.

Mr. William Hamling: May I first say, Mr. Deputy Speaker, what a great pleasure it is for me to speak in the House for the first time under your Chairmanship and to wish you a long and very happy stay in the Chair.
The speech of the hon. Member for Horsham (Mr. Hordern) is to some extent an echo of one or two earlier Conservative speeches, and they are, I submit, shot full of contradictions, because the Conservatives want the community to spend more money in various ways while at the same time they want to reduce the amount of money which the community is spending. This is a kind of split-mindedness to which I will return.
My hon. Friend the Member for Lewisham, West (Mr. Dickens) made a deplorable speech. He began by saying that he would not make a personal attack on Ministers and proceeded to make what I can only describe as the most damaging attack that could be made on any Minister at any time. He accused my right hon. Friends of the worst kind of inhumanity. He said that the Labour Government were deliberately creating

unemployment as an act of Government policy. I can think of no act by any Government which would be more inhumane and cruel. Indeed, if my hon. Friend believes that the Government are deliberately creating unemployment he should resign from the Labour Party. If I thought that, I would resign because I could not belong to a party or support a Government who had that as their aim.
My hon. Friend went on to use other expressions of opinion which I could not regard as anything but a personal attack. He talked, for example, about the Government's "complacent, reactionary humbug". I put it to him and other of my hon. Friends who hold his views that they must say where they stand in relation to the Government.
I will not spend too much time on my hon. Friend's speech because I wish to come to the main burden of my remarks, which is an analysis of the comments of the Opposition Front Bench. One of our difficulties is that we must spend so much time rebutting that sort of attack made by my hon. Friend and others of my hon. Friends that the Opposition are able to get away with murder. Internal disputes in the Labour Party help hon. Gentlemen opposite. My hon. Friend made a 22-minute speech of which only four minutes were devoted to the Opposition and 18 minutes to attacking the Government.
What advice would my hon. Friend have given to the electors of Bassetlaw had he been invited to address them? Would he have spoken to the complacent humbug of the Labour Government? Would he have told them that they are deliberately creating unemployment? I ask my hon. Friends who have tabled an Amendment to the Address why the electors of Bassetlaw or any other constituency should vote Labour if that is what my hon. Friends believe? Who would have defended the Government at Bassetlaw if my hon. Friends had been called on to undertake that task?
As a result of this sort of Amendment, the Tory Party, both in the House and in the country, can get away with murder. The searchlight of public inquiry and opinion is never put on their policies. How much time has been spent in this debate analysing the terms of the Opposition Motion? The answer is very


little. Hon. Gentlemen opposite can get away with talking a lot of contradictory nonsense because their remarks are not subjected to real examination.
Some of my hon. Friends spend so much time attacking their own side that the Tory record is forgotten and Tory policies are not examined. By this means my hon. Friends are helping to elect the next Tory Government. The Government's case is going by default. We are told, for example, by the right hon. Member for Enfield, West (Mr. Iain Macleod) of the dishonest attitude of my right hon. Friends over the so-called freeze. There was a lot of synthetic indignation in the right hon. Gentleman's closing remarks, and the same can be said of the comments of the right hon. Member for Bexley (Mr. Heath), whose synthetic indignation is normally almost hysterical.
We have had by-elections in other mining areas. Pit closures most damage the Labour cause in mining constituencies. Were there no pit closures announced just before various by-elections in other mining constituencies? Of course there were, and there were in this case. Increasing Purchase Tax on motor cars from 33 per cent. to 40 per cent. is not worth a halfpenny compared with pit closures from the point of view of the Labour cause in mining constituencies.
We want less of this damned nonsense from hon. Gentlemen opposite. Let us not worry too much about what the Tories were doing when they were in office. We know precisely what they did, and if there is any dishonesty and deception now, it is in the speeches which Conservatives are making. They call for reductions in Government expenditure and the same day call for increases, too. One need only consult the Notice Paper to see the many Questions tabled by hon. Gentlemen opposite asking for increased expenditure on the National Health Service, education, universities, roads in their constituencies, housing and allowances for private occupiers of houses to spend on repairs. They have the nerve to talk about reductions in Government expenditure when all the time they are demanding that the Government should spend more. They demand bigger agricultural subsidies and then have the cheek to complain about Government expenditure.
Hon. Gentlemen opposite speak with two voices and they can get away with it because their record and programme are not sufficiently analysed. For example, when trying to explain what the official Opposition Amendment was all about, the right hon. Member for Enfield, West talked about a cut in direct taxation. He did not say that if the Tories were in power they would also increase indirect taxation, with the result that the lower-paid would have a worsened standard of living. Unfortunately these things are not said.
Another example of this split-mindedness and dishonesty on the part of the Conservative Party came from one of the Tories' main speakers at the Bassetlaw by-election. He was the right hon. Member for Wolverhampton, South-West (Mr. Powell), who is certainly no friend of any scheme to give Government assistance to the development areas. The right hon. Member for Enfield, West complained today that the Government were not doing enough, yet so many in his party feel that the Government do far too much in that direction.
Many hon. Members opposite think that the Government should not interfere, that there is too much public investment. Therefore, presumably, they would side with the right hon. Member for Wolverhampton, South-West and not the right hon. Member for Enfield, West. This also is an aspect of Tory party policy which is not sufficiently examined. If public opinion and scrutiny were given to their policies, that opinion would have a completely different aspect.
If the right hon. Member for Wolverhampton, South-West were to be followed, it would mean that the North would die and the South-East wax fat and even more prosperous. But that is not the voice which we heard this afternoon. The country is entitled to know what is the real voice of Tory policy in this regard. We know, for example, what big business says about expenditure on education, hospitals and housing—that the community is spending too much. If they had their way, we would cut down tremendously on education.
What does the Front Bench say? Question after question last week and this week was directed towards asking for more money and giving the impression at by-elections that the Government


are not doing enough and that, if the voters voted for them, they would get more, when we know what their real paymasters are saying behind the scenes. We know that the voice of big business and high finance, the real voice of the Tory Party, wants huge cuts in public expenditure. In this debate, too little time has been spent analysing the real policies of the Conservative Party.
We had from the right hon. Member for Barnet (Mr. Maudling) the other night on television an argument about the social wage—a very pleasant and engaging argument, at least on television. But in real political terms, it means that we would spend less on housing, education and hospitals if the social wage were reduced. More would be put into personal consumption. That is what the argument is about, and put in human terms, it is not so nice and cosy.
The Tory Party has been saying for the last four years that public expenditure is out of control. What is the major thing that they would do if back in power? They would increase defence expenditure by many millions. Then they have the cheek to talk to us about reducing Government expenditure. They would not reduce it in that direction. They could only decrease the total if they decreased expenditure on education and social services even more than some of their spokesmen suggest.
The Opposition Amendment is dishonest and deceptive. I will throw back at them their charge that my right hon. Friends have been deceiving the country. They themselves deceive the country every day by pretending that they believe something and are putting forward policies for which they do not stand.

8.33 p.m.

Mr. Michael Alison: I think that the hon. Member for Woolwich, West (Mr. Hamling), for whom I have a great regard and with whom I often debate, was jumping the gun and straying from the Queen's Speech in anticipation of being on the Opposition benches attacking Conservative policy when we are in government. In other words, he moved right ahead to when the whole preoccupation will be with Tory policies. It was a long way from the Queen's Speech. If he has found fault with the Opposition in allegations

that we always want the best of all possible worlds at no cost, I am sure that he will agree that, if he is in opposition on these benches in a few months or years, he may be prone to exactly the same shortcomings and sins of omission and commission. So I hope that he will not be too anxious to throw stones.
I want to concentrate on a new trend which I detected today in the Chancellor's approach to forecasts. He seems to be getting touchy and irrational on the subject. Economic forecasts are extremely important and it is not a question, when the Chancellor makes a forecast, of something like a bet on who will win the American Presidential election and that, whatever the outcome, it does not affect us directly. Treasury forecasts are crucially important, because they are followed by a pulling of levers and we are all tremendously affected.
It is not good enough for the Chancellor to suggest, as he seemed to do today, that if one gets a forecast wrong that does not matter because what one loses on the swings one can pick up on the roundabouts. The result would be catastrophic, and it has been catastrophic. It suggests that it does not matter if, for example, export performance does not come up to expectation provided that some other component or final demand compensates for the shortfall. This seems to be one of the arguments put by the Chancellor about fundamental mistakes in forecasting.
It is no defence of wrong forecasts to say, "We publish our forecasts". The fact is that those forecasts existed, published or unpublished, and if they were wrong they led to wrong decisions. If the Government go on being as wrong as they have been, the only remedy is for them to get out of the area in which they forecast so ineffectively. They should diminish the area in which they have to forecast if the forecasts are to be so disastrously wrong.
Then there is the stage which follows forecasts. One of the staggering things we have found since the Socialist Party came into power is not only the enormously increased area of Government interference, but the utterly perverse effect of economic decisions which they make and the levers which they pull. On the general question of employment, perhaps the blackest mark against this


Administration is that the Government of planners and full employment specialists, as they claim to be, have succeeded by the year 1968 in having something like 100,000 fewer men and women in the employed labour force than when the Tories left office in 1964. That is almost staggering, but it is a fact.
This is against a background of an increase in the population of one million. It is almost breath-taking that the Government have not only failed to maintain employment in step with the growth of population, but have actually gone in the opposite direction. More and more British brains and brawn have become available since 1964, but fewer and fewer jobs have been found for them. This is surely a crippling indictment, or it should be if people have eyes to see.
Within the sectors where employment has continued—I shall not say increased—one finds again the most perverse and irrational results of Socialist economic manipulation. In June, 1965, which I take as the first peak month of employment alter the Socialists came into office, there were just over 9 million people employed in manufacturing industry and in the same month in the service industries there were just short of 9,700,000. This was the pattern of employment when the Socialists came to power. Two years later, in June, 1967, the latest date for which figures are available, after two years of Socialist planning—the National Plan, Selective Employment Tax and the whole gamut of incentives to try to shift resources out of the service industries to manufacturing industries—we find an utterly perverse and contrary result. There has been an actual drop in employment of 150,000 in manufacturing industry and an increase in service industry employment of 80,000.
That is precisely the reverse of what was expected and designed. It appears from the way that the Government are running the country as if there is a chimpanzee in Downing Street to whom a bucket of paint and a canvas has been given, and members of the Government sit back to see if any rational result comes from the splashings.
Whatever happens, it is absolutely the reverse of what the Government sought to do. They have succeeded in massively diminishing employment overall. Within

the diminished total they have succeeded in giving a substantial boost to employment in service industries and a crippling diminution to employment in manufacturing industries. What is the point of a Government who not only get their forecasts wrong but who when they press the button to get the green light get the red light, and when they press the button to get the red light get the green light?
Some people would assert that on the manufacturing side it does not matter so much, in that it could be argued that the decrease in employment in manufacturing industry has been counteracted or was designed to be counteracted, by a growth in capital employed in manufacturing industry, so that capital was being substituted for labour in this sector.
There is again the ludicrously perverse result that exactly the opposite has happened. In 1966, the base year of the present Administration, the level of investment in manufacturing industry was £1,233 million, at 1958 prices seasonally adjusted. One year later, in 1967, the figure had dropped to £1·176 million. This year it is running at the rate of £1,118 million. This is a drop of £115 million or getting on for 10 per cent. in investment in manufacturing industry.
Against the background of the substitution of investment grants for investment incentives, and of the Selective Employment Tax, which was designed to inhibit and restrict growth in the service industries and correspondingly to give a boost to manufacturing industries, there is the utterly perverse and contrary result of a steady drop in manufacturing investment.
Incidentally, this calls into question the whole range of special investment and other measures of assistance which is being given to manufacturing industries in development areas. Here I must tread cautiously because some hon. Members have constituencies which are involved. The Prime Minister quoted the figure of £250 million a year rather proudly in the speech he made on the first day of our debate on the Loyal Address. He referred in a rather cavalier way to the mere £18 million which my right hon. Friend the Member for Bexley (Mr. Heath) spent in 1964.
But even with the expenditure of £250 million in the development areas, the


level of regional unemployment has without exception moved up in all the development areas, in spite of this fantastic increase in special assistance compared to the last year in which the Tory Party was in office—that is, the time when my right hon. Friend the Leader of the Opposition was responsible. One must question whether the £250 million which is going into the development areas, apparently simply increasing potential demand in the economy whilst doing absolutely nothing to increase supply to requite this demand, is having any effect other than increasing the money supply. This seems to be one of the basic causes of the problem which the I.M.F. team has come over to look at.
In the development areas there is rising unemployment and decreasing production, against the background of the staggering rise in this universal, undiscriminating, hand-out assistance to selected areas. To see how ludicrous it is, it is only necessary to reflect that Yorkshire and Humberside, which is a "grey" area and enjoys no special assistance, have more men unemployed than either Wales or the South-Western areas; yet we get nothing. The whole system is totally irrational and fails to produce any of the desired results.
What worries one about the trend of the Government's failure in their forecasting and in their failure to pull the right lever to produce the designed result is that we are confronted with a most serious situation instead of the Utopia—the golden fleece—which has been held out before us. We are now told that the great leap forward is coming, that the export-led boom is on the threshold. If that really is so, industry is in a poor position to take the leap forward, particularly because of the serious cut-back in investment to which I have referred. Indeed, the signs of the time for a great leap forward and an export-led boom fill one with all the forebodings which might, in retrospect, have been felt in 1964 as one looked ahead to the deficit that year.
As the Chief Secretary is aware, no doubt, the stock-building figure is now very worrying. I think I am right in saying that manufacturing stocks, by which I mean fuels and raw materials, fell by £160 million in the six months up to March, 1968. If a drop in manufac-

turers' stocks of that scale as recently as up to March, 1968, is the background against which we are to expect a substantial leap forward in manufactured exports, the import bill which will be generated by a significant rise in industrial activity based upon manufacturing for export become breath-taking. It will certainly be a great deal larger than the huge stock-building boom which occurred in 1964. Against the background of a serious drop in investment, we shall not only have a huge inflow of fuels and raw materials to give industry its launching pad for the export-led boom but, more than that, we shall be bound to have a huge inflow of capital equipment. This is already happening in electricity generating equipment and electrical machinery.
To return to the question of forecasting, against the background of the further cut which he was bound to make and against the sort of demand level which we have now, with the pressure on sterling and all the rest, the Chancellor was quite wrong yet again to give us his euphoric view of prospects round the corner. It is the wrong psychological medicine to offer the House. He must know that his investment forecasts and projections of an upturn in investment are questionable, to say the least. I quote here from the current October issue of the broadsheet issued by the Department of Economic Affairs, which refers rather wistfully to what has happened to investment. In the concluding paragraph of the piece on investment prospects this is what we read:
Forecasts supplied in November/December 1967 indicated an expected rise of 5 per cent. in the volume of manufacturing industry's investment between 1967 and 1968, compared with a drop of 4½ per cent. between 1966 and 1967.
This expected 5 per cent. increase, however, did not happen. The broadsheet goes on rather coyly to say:
However, the continued fall in manufacturing investment in the first half of 1968 creates some uncertainty about the timing of the upturn"—
one of the most delicious and "dodgy "question-marks hung over an official forecast that one could possibly find.
Yet the Chancellor solemnly tells us today that the investment boom for manufacturing industry is only just around the corner. Against the background of


the new restrictions on hire purchase which we have just had, it is extremely unlikely that we shall have it, but, if the boom does come, it will be in imports of investment goods because British industry will be loo ill-equipped to produce them.
This is the great indictment against the Government. Their forecasts were wrong and the levers which they pressed produced perverse effects. The sooner the Government leave the economy alone and we have industrialists and businessmen running it, the better and healthier it will be for Britain.

8.49 p.m.

Mr. John Cronin: The hon. Member for Barkston Ash (Mr. Alison) made an interesting though somewhat polemic speech. He seems to take a rather lugubrious view of the country's prospects altogether. He made the point that there has been a decrease of employment in manufacturing industry, but he did not add that there has been an increase in the production of manufacturing industry. Plainly, what employment there has been is often put to more effective use under a Labour Government than it has been hitherto.
This is a rather difficult debate in which to speak, because the course is uncertain. Nobody knows exactly what will happen in the immediate future. I am delighted to see here my right hon. Friend the Chief Secretary to the Treasury whom I congratulate on being in the Cabinet, which will be a better place for his being there. I am sure that although he is taking note of our views with care he appreciates that it is difficult to give advice at this stage. We are advising my right hon. Friend the Chancellor rather as we should advise a man who is half way across a tight rope. It is difficult to know exactly what to tell him. One can only wish that all will go well.
I think that so far the Chancellor is doing a very good job. This is shown to some extent even by the criticisms made about him in recent months. A short time ago there was a fear that unemployment would be much greater. More recently there has been a fear that there would be more inflation. That rapid change of criticism between the two extremes suggests that he is going along roughly the right course.
But I should not like the Chief Secretary to think that I shall speak entirely in praise of everything that has happened. The school meal cuts in the past few days were an example of the Treasury at its worst. The saving is paltry, and it gives the impression that the Government are depriving some school children of their meals. It is not a happy political gesture. Perhaps it would have been helpful if my right hon. Friend the Secretary of State for Education and Science had specified what the alternative expenditure would be, but he simply said that the money would be spent more wisely. It would have been better for everyone if that rather paltry cut had not been made.
Today's debate is really based on giving economic advice to the Chief Secretary, and it is difficult to say exactly what should be done, because the choices available at present lie between emphasis on growth, external equilibrium, internal stability, regional balance, and social progress. Since the right hon. Member for Barnet (Mr. Maudling) is here, I might mention an alternative economic goal—winning the next election, which was something he did not succeed in doing, though he tried very hard.
The Government are obviously giving priority to external equilibrium, and in the national interest this must be the top priority. It is only on the opposite side of the House that national interests are subjected to immediate electoral ones. It never happens on this side of the House. In the interests of my own political future, I sometimes wish that Ministers had a little less integrity in looking after the national interest at the expense of political popularity.
It is clear that the wage freeze is politically unacceptable. It is temporary, and I think that it is transient in its effects. There is uncertainty as to whether devaluation will work by itself. In spite of the 14 per cent. devaluation there has already been an increase of 8 per cent. in export prices, and I am not convinced that the margin of 6 per cent. will make all the difference to our export trade. It is even more uncertain whether the inflationary measures taken by the Government will help. This is a time-honoured form of treatment for economic ills which has been carried out every few years in the last 20 years—with considerable lack


of success on every occasion. If one looks at the graph of production over the last 20 years, it is almost a continuous horizontal zig-zag. So it is difficult to say that deflation by itself will be very helpful.
I suggest to the Financial Secretary that there should be some definite direct attack on the balance of payments problem. It is overwhelmingly obvious that there has been a great excess of imports over the last few years. The Government should attack this directly. But even if we have an export boom, which is what everybody wants, it will suck in a big increase of imports not necessarily of a particularly helpful nature to the economy. So it would be helpful if the Government would give serious consideration to having import quotas.
Import quotas are completely permissible under the terms of G.A.T.T. and E.F.T.A., and if they were used for certain selected imports of a luxury nature I do not think it likely that there would be any serious reprisals against us in world trade. Also it would be helpful to have some restriction on credit for imports. This could be handled easily through the ordinary financial machinery, again without any possibility of reprisals by other countries.

Mr. Bessell: Mr. Bessell rose—

Mr. Cronin: I am sorry, but I cannot give way. The time is short.
The Government ought also to practise a policy which was very successfully pursued by the 1945–51 Labour Government. They should put more investment into factories which use import subsidies.
Finally on the question of imports, there is much to be said for the withdrawal or modification of investment grants. At present we are importing about £800,000 worth of plant and machinery, and it seems absurd that this is being directly financed to a substantial extent by the Government. It is also having the effect of putting pressure on our own machine tool industry. There is a strong case for removing the investment grants at the earliest possible opportunity.
There is obviously some room for improving the imports situation, but there

is an unlimited prospect for increasing exports, and I think that could be achieved very much by giving more incentives to exporting firms. The Government could easily divert Government contracts to firms which have good export records. A very large number of firms live on Government contracts and make little attempt to increase their exports. The Government should attend to this.
There is also much to be said for preferential taxation for firms which export on a large scale. At present preferential taxation is devoted solely to expenses. If an executive takes a foreign buyer out to dinner and a night club, that can be put against taxation. So there is nothing unprecedented in the idea of having preferential taxation treatment for exports. Possibly the reintroduction of share options for export executives might be helpful.
Having given that piece of advice to the Government, I want to give a little consolation. One of the most impressive aspects of the debate is the barrenness of Opposition policy in the economic situation. The speech of the right hon. Member for Enfield, West (Mr. Iain Macleod) suffered from an advance publicity build-up rather suggestive of the heavyweight prize ring. It was a rather mild speech. At no time did he produce any constructive suggestions. All he could say was that the Conservatives would reduce taxation and he produced an extraordinary theory that this would increase savings. He did not go on to point out that the reduction in direct taxation would be brought about by increasing indirect taxation, which would have an adverse effect on the vast mass of the population.
My consolation to the Government, therefore, is this: whatever difficulties we are going through economically, we can at least say that the prospective alternative Government are completely barren of useful policies.

9.0 p.m.

Mr. Reginald Maudling: I was interested in the suggestion of the hon. Member for Loughborough (Mr. Cronin) for the restoration of stock options. He meant the restoration of the taxation position on stock options for executives engaged in the


export business. It is certainly an idea to consider.
I was taken aback when the hon. Gentleman talked in favour of discriminatory import controls. Nothing could do worse for our trade. He referred also to investment grants. We cannot have a system whereby we pay investment grants only on British and not on imported equipment. Every trade rule we exist by rules that out.
Some hon. Members opposite have advocated controls on what they call unnecessary goods from abroad. The hon. Member for Wolverhampton, North-East (Mrs. Renée Short) was among them. But how many things that we sell overseas can be defined as wholly necessary? Whisky is among our greatest exports but it could be said to be unnecessary, although not everyone would agree with that. We depend upon selling woollen and leather articles and other goods which might well be described as unnecessary. It is an illusion for hon. Members opposite to think that we could cure our trading problems by refusing to buy from others the sort of things we are trying to sell to them. I hope that the Government will continue to resist these blandishments.
We are now in the concluding stages of the debate and, in accordance with tradition, the Leader of the House is to reply. I believe that he will range widely and will not merely concentrate on our Amendment. I shall spend most of my time on the economic situation, but I have one or two other things to say first.
Our condemnation of the Government is that so few of the proposals in the Gracious Speech have any relation to current economic problems, and anyone listening to the debate could not fail to be convinced of the accuracy and validity of our argument. In the Gracious Speech are many worthy Measures which I am sure the House will approve and pass, but few of them have any relation to our economic problems.
Of the non-economic Measures, I think that most attention has been focussed, by the Prime Minister particularly, upon the constitutional proposals, and these are, of course, of considerable interest. But one point about the proposed Constitutional Commission has been taken outside in other quarters, and this is that it

seems odd to proceed immediately with reform, for example, of the Upper Chamber before the Constitutional Commission has considered generally the constitutional set-up which might itself be reflected in the Upper Chamber. This is something that we can discuss later, but we on this side believe that it is right to try and proceed with reform of the House of Lords by agreement.
We were rather surprised when the Prime Minister had his little huff a little while ago and broke off the conversations, but we are glad that he has come back to the position, roughly speaking, which had been reached in the discussions between the various parties. Certainly, we hope that an agreement can be maintained between the parties and a solution found to the future constitution of the Upper House which will enable it to make the maximum contribution to our country and to our constitution. In these discussions we on our side always reserved our position on timing. We do not think it right to introduce the new composition of the Upper Chamber based on the electoral situation of 1966. The reformed new Chamber should come into effect after another election and reflect the political realities at the time that it is introduced.
I turn now to the main question, the economic situation. Nearly a year after devaluation the balance of payments situation is still causing the Government great concern and, as my right hon. Friend so rightly itemised this afternoon, time and time again the Government's forecasts of "rounding the corner", "success ahead", "easy waters ahead", have been falsified, and there is no reason why either the House or the country should believe that they are right now when they have been wrong so often in the past.
The balance of payments and the trading figures on current account are the most important figures which show the genuine over-spending of our country. The balance of payments on trade account in 1964 was over £500 million, and what a hullaballoo there was about that—the wicked Tories, the wicked Chancellor of the Exchequer to allow the deficit to escalate to £500 million. Now despite £2,000 million additional taxation and unemployment at historically high post-war levels, the trade deficit for the last 12 months was not


£500 million, nor £600 million, but very nearly £900 million. This is the condemnation of the Government's conduct of our economy which they must endeavour to answer.
As my right hon. Friend said this afternoon, unemployment is high. In 1964, the economy was moving ahead fast and unemployment was low. Now, after these years of Labour government, unemployment is high and, whatever the loyal hon. Member for Woolwich, West (Mr. Hamling) may say, the measures announced last Friday are designed to increase the amount of unemployment. They are designed to cut down demand, and if demand is cut down then unemployment is increased; it is as simple as that.
Then there is the serious problem of our exports being threatened in some vital industries by strikes. We have to recognise that, as industry becomes more efficient and more modern, so strikes becomes more serious. An efficient, integrated, modern industry, with supplies of components coming from one or two sources, and very low stocks held, is always far more vulnerable to wildcat strikes in one sector, and no problem which we are facing today is more serious than this.
Then there is the burden of debt, to which reference has been made. I hope that the Prime Minister is prepared to listen to what I have to say about the burden of debt. It has grown a great deal in the last three years, partly by reason of our overspending as a nation, and partly by reason of devaluation itself, which increased by a large sum the real burden of our international indebtedness. Now we have the Basle Agreement. I for one think that in the Basle Agreement the Bank of England bailed out the Government from a very awkward situation, but it was at a price, and we still want to know the price. The Chancellor of the Exchequer recently gave my right hon. Friend a figure of £600 million. Now he says that it is not £600 million, but he is not prepared to say what it is. If he could the other day give the figure of what he thought would be drawn, why can he not now give the actual figure?
Then we have the Budget judgment. I am sorry to disagree with the Chan- 
cellor. I think that his Budget judgment has been falsified. He was estimating a reduction in consumption. There has been no reduction. Now he is taking these new measures affecting hire purchase and school meals, and I am sure that we shall not know for some time what more is to come. It is an extraordinary situation. If the variation from the Chancellor's plans is so small, if £100 million is so little in our economy, why is it necessary to do what the Government have done about school meals for the sake of £4 million? It is a very odd scale of priorities upon which the Government operate.
So we say that in all these matters—in the failure over the balance of payments, the threat to exports from strikes, the burden of debt, and the failure of the Budget judgment—the Government are failing in their economic measures. Above all, they are failing to restore confidence, and confidence is essential to the prosperity of a trading country like ours.
We all agree, of course, that exports are doing well. We are glad to see that, but it has a long way to go. British industry, men and management, has to make and sell 17 per cent. more to get the same foreign exchange earnings that it got a year ago. The Prime Minister really cannot claim, as he tried to last week, the credit for his Government for the achievements of British industry in exports. It is true that the Government have done something to help. They could hardly fail to do something. But, by taxation and by interference with the processes of trade and commerce, they create problems and burdens for industry which are extremely heavy.
To take one or two examples of what the Prime Minister said, shipbuilding orders are up by £100 million, but "only because of the reconstruction following the passage of the Shipbuilding Act." That was a typical remark by the Prime Minister. I agree that there is some truth in it. The Act, based on the Geddes Report, is a very valuable one. However, as the Prime Minister knows, I have a personal interest, and anyone who knows the industry also knows that the main reasons for the increase in orders are, first, the high freight rates and the international order situation; second, the fear of devaluation in the past and uncertainty about sterling now which leads


people to buy sterling ships; and, third, the credit terms available for foreign purchasers which were instituted by the Conservative Government. Those are the real reasons for the increase in shipbuilding orders.
Taking another example of the Prime Minister's efforts, he says that the motor industry is able to take advantage of increased export orders because of Government aided restructuring under the I.R.C. Act. He really said that. Let us see what has happened. The I.R.C. has played some part in the merger of B.M.H. and Leyland. That merger is good for the industry, but whether it has played a decisive part, no one knows. When it comes to exporting, it must not be forgotten that British Motor Holdings-Leyland exports went up by 35 per cent. That was a very good effort. However, Ford, not restructured, increased its exports by 45 per cent., and Vauxhall, not restructured, increased its exports by 66 per cent. How can the Prime Minister seriously come to the House of Commons and claim credit for the increase in motor export orders?
For good measure, he added that export orders of engineering products generally were up by 8 per cent. I should hope so. Until they get to 17 per cent., they will not get back to where they were before devaluation.
The trouble with the Prime Minister is that he never reveals the whole situation. Always he says part of it. Look at how he dealt with the question of aid to the development districts. There was a very interesting passage in his speech in which he said that the present Government's assistance is now £250 million, whereas the assistance that we made available was £18 million. That implies that that is all that there is to it, with £250 million from them and only £18 million from us. That was his point.
I do not often question the Prime Minister's figures, because he can get the Civil Service to give them to him and because he knows that, if he gives an inaccurate one, we can catch him out. However, again, he does not give the whole truth. He said that £18 million is all the aid that we gave. An Answer given by one of his colleagues earlier suggests that the figure was not £18 million but £30 million. But the Prime Minister forgot the small item of

depreciation and allowances. The present Government have given investment grants, but they have taken away investment allowances. He has forgotten the little matter of free depreciation which, on our plans, in 1966–67 would have given £45 million to the development districts. Again, that little item is forgotten. Possibly the Prime Minister has also forgotten the old principle that, if one suppresses what is true, one suggests what is false.

Mr. Michael Foot: Since the right hon. Gentleman is such a powerful advocate of the desirability for telling the whole truth, will he now tell us on what date he forecast to the country the 1964 deficit?

Mr. Maudling: I shall be delighted to answer that question. I forecast in my Budget speech in 1963 that there would be a substantial deficit in 1964. Throughout 1964 every trade return and every figure was published without emendation or delay. That is more than hon. Members opposite can say.

Mr. Foot: I am not accusing the right hon. Gentleman of suppression. I am asking when he announced it. Is he now telling us that the deficit achieved in 1964 was achieved on purpose?

Mr. Maudling: I am saying that I said in 1963 that we would have a deficit in 1964 in order to get the economy expanding, and that we would draw on our working capital from the World Bank. At that time my statement was received with the full approval of the present Prime Minister

The Prime Minister (Mr. Harold Wilson): The right hon. Gentleman knows that we publish the trade figures a great deal faster than he did. In view of the very bad trade figures that were published on 16th October, a few hours after the polls closed, will he say at what hour those figures were in the hands of the Government?

Hon. Members: Answer.

Mr. Maudling: Of course I will answer. Those figures reached my hands at 8.30 p.m. on polling day. If the Prime Minister is suggesting that at any time I caused a delay in the publication of the trade figures I hope that he will have the guts and decency to say so openly.

The Prime Minister: The right hon. Gentleman has told us at what time he got them. At what time did the President of the Board of Trade get them? In view of the fact that, 20 years ago, I always had the trade figures on the 11th day of the month, why did he not have them until the 16th?

Mr. Maudling: The Prime Minister is talking nonsense. They never arrive on the 11th day of the month. It is a different date each month, as he knows, from the situation under his Government. I am saying that if he is accusing me of delaying the publication of the figures, let him say so. We want to know this. Is he accusing me? He tried this one three years ago. I have taken a lot about 1964 and I will take no more from the Prime Minister. I am not prepared to accept these sedentary expressions. [Interruption.] The right hon. Gentleman is not worth getting angry with.
I return to the main subject of our Amendment, from which I was diverted by the Prime Minister. It is that the measures in the Queen's Speech have little if any relevance to our economic situation.
Of course, the measures on Friday had some relevance. In the Gracious Speech we were told that the Government would safeguard employment, which they proceeded to do by putting on hire-purchase control. How important were these measures? I think that the Chancellor would like overseas opinion to think that they were important, but the First Secretary and the President of the Board of Trade say that they are nothing—a mere £100 million, or nothing at all in the great turn which we have seen of the deflation which the Labour Government are imposing on this country.
They could have been avoided. There were other ways of cutting back on consumption. If there had not been the spending spree in the early months of this year, last winter, they would not have been necessary. I know that the current Treasury doctrine was that people could not spend money twice, but, with modern methods of borrowing, they can. As my right hon. Friend said, once they get into the habit of spending, it is a habit which will continue. There has been a flight from money, occasioned by the Government themselves.
When they say, of course prices will go up, what do they expect people to do? They go out and spend money before prices do go up. Then they are assured by the Prime Minister that the pound in their pocket has not been devalued. If the Government had managed their prices and incomes policy better, things might have been different. What has happened under the right hon. Lady the First Secretary? Under the right hon. Member for Belper (Mr. George Brown) prices were restrained to some extent, but incomes were not and they created a far greater inflation than would have happened otherwise. It was the cause of the 1966 crisis and the 1966 measures and it is the cause of the present economic freeze.
Yet Government expenditure marches rapidly on. The Government are curious about expenditure. As I said, they are prepared to impose this policy on school meals which many of their supporters dislike, for the sake of £4 million, yet the increase in the Civil Service, which they treat with such complacency, if not with pride, is 57,000 people, since they came in, a cost of £145 million a year—a 34 per cent. increase in cost. If they had tackled the problem of Government expenditure and savings instead of talking about wealth taxes and what they did about the Married Women's Property Act policy, if they encouraged savings, they could cut back on consumer expenditure without the sort of measures which they have now, belatedly, been forced to introduce.
One of the great omissions from the Gracious Speech is any positive action to deal with labour relations. The Government have promised a White Paper, but this is not fast or urgent enough. The Chancellor himself, I think, would say that the two main threats to his balance of payments forecast come from the labour problem. On the one hand, there are crippling strikes and on the other there is a break-through in incomes which must force up our costs to uncompetitive levels. This is the most urgent and fundamental of all our problems. Certainly, the effect of unofficial strikes on our exports has become very serious. It is not merely the delay in export deliveries which causes concern but the loss of future orders and the loss of confidence abroad in this country's ability to deliver what we say we will deliver.
I implore the Government to realise the urgency of dealing with this situation—[An HON. MEMBER: "Do your own dirty work."] We should be very happy to do the work which we believe the country needs. We think that legislation is needed to bring the law relating to the unions and their individual members up to date in the interests both of society as a whole and of the individual union members. We believe that it is time to provide in our law that, when people make a bargain, both sides should be kept to that bargain, if necessary in a court of law.
We believe also that the time has come for some provision whereby there would be a cooling-off period when strikes are threatened which are a real national danger, followed by a secret ballot before a strike is held. People say it is difficult to legislate. Of course it is, but I would make three points on that. First, other countries do it. In fact, most other countries have legislation of this kind. Second, I believe that if we set all these problems of labour relations in a proper legal framework which reflected what the community wants to see, there would then be a new opportunity for responsible trade union leaders to impose the leadership and get the following which they really want to achieve their ends. Third, I am quite convinced that the public as a whole, including members of trade unions, are sick and tired of the present situation and are entirely ready, willing and anxious to see legislation of this character enacted by this House.

Mr. Eric S. Heffer: Mr. Eric S. Heffer (Liverpool, Walton) rose—

Mr. Maudling: I am sorry, but I am very short of time.
I have been asked to deal with the positive things we think should have been in the Gracious Speech. I have given one very definite one, legislation on trade unions. I give another very definite one—cutting back on Government expenditure. [HON. MEMBERS: "Where?"] I have given one example already—the enormous growth of the bureaucracy costing £150 million. I give a third one, increase in savings. I give a fourth point, cutting back on taxation, particularly a: the higher levels of earning. The present penal level of tax on those who make the greatest success of their

trade or business or industry discourages them, and not only them but all the ambitious young men below them. These are the kinds of things which should have been included in the Gracious Speech, and we regret their absence.
I turn, finally, to the question raised already of the position about the announcement on Friday morning on hire-purchase controls. Let it be quite clear that this was the position, as we know from what the President of the Board of Trade said, that the decision was taken before this debate began. [An HON. MEMBER: "Oh, no."] Oh, yest. Look at what the right hon. Gentleman said on Friday. Quite clearly, he made that absolutely plain to all of us. It was in line with what the Prime Minister said on that previous occasion when the Prime Minister was challenged repeatedly by my right hon. Friend on this particular point. He was asked to say whether this was so.
I quote my right hon. Friend:
Would the right hon. Gentleman now answer my question about measures to limit consumer demand? Are they or are they not to be taken?"—[OFFICIAL REPORT, 30th October, 1968; Vol. 772, c. 49.]
That was his question. The Prime Minister knew at the time that there was only one truthful answer, which was, Yes. He did not give it. He preferred instead to talk about announcements being made when they were considered to be necessary. What made it necessary on Friday, when it was not on Wednesday or Thursday?
Then we had the right hon. Lady, whose words were confirmed by the Leader of the House, who will wind up this debate. I bring him in because he is to wind up and will be able to answer. The right hon. Lady said on Wednesday that there was no economic freeze on the way. It was confirmed on Thursday by the Leader of the House who also said that the Chancellor had no statement to make. The fact is the President of the Board of Trade made the statement the next day. The Leader of the House must have known this statement was coming along. Both Ministers knew perfectly well at the time that the decision had been taken by the Government to impose these new controls. Of that we must be absolutely clear.
What is their excuse? Their excuse is that the hire-purchase clamp down is not an economic freeze. It is a very poor excuse. They knew perfectly well that what was in the minds of the public and their elected representatives in the House was hire-purchase controls, because their scheme had leaked to the Press on Wednesday. It was not just speculation. It was a very definite leak, and when that leak occurred in the Press on Wednesday Ministers conspired to make the public believe that those leaks and rumours were not true when they knew they were true.
As to whether it is a freeze or not—well, if we look at the controls imposed by the Order on hire purchase, they exactly coincide with the freeze of 1966 in every single detailed particular. It may be that the right hon. Lady will say that it is only part of a freeze, not a complete freeze. She may be right on that, but this is the important charge against the Government, that they do not tell an absolute untruth, but they never tell the absolute truth, either. It is always half truth, of which the Prime Minister is a past master. By the contempt with which they treat the electors and by the standards of their own conduct in office, they have forfeited their right to be the Government.

9.31 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): Today we have had two speeches from the Opposition Front Bench which have both highlighted what they described as a charge of bad faith against the Prime Minister, the First Secretary and myself. The right hon. Member for Enfield, West (Mr. Iain Macleod) did not mention me, but the right hon. Member for Barnet (Mr. Maudling) mentioned my name both earlier and again in his last speech. I want to deal specifically with that charge before I turn to the main issues of the debate. It is right that I should deal with it early as it has been taken up by the Press. We have been accused not only of bad faith but of not telling the truth. As the importance of that charge goes beyond the immediate debate, I must put the record straight.
Last Thursday afternoon, following the Business statement, I made two comments

on this matter. First, I confirmed the remarks of my right hon. Friend when, in reply to a heckler in a by-election, she said that there was no economic freeze on the way. I agree with that. Secondly, several times, and once in answer to a specific question about an Order relating to hire-purchase restrictions, I said:
If a statement is necessary, I will see that it is made.
Within hours my words had been distorted. It was claimed that I had said that there were to be no hire-purchase restrictions. I was accused by the hon. Member for Louth (Sir C. Osborne) of not telling the truth. If we are talking of bad faith, may I ask who leaked in formation to the hon. Member for Louth? Who broke the confidentiality which is traditional in the way we conduct our discussions through the usual channels? The Leader of the House should address his attention to that question—

Mr. Heath: The Leader of the House?

Mr. Peart: I mean you—the Leader of the Opposition.

Mr. Deputy Speaker (Mr. Sydney Irving): Order. I hope that the right hon. Gentleman will use the traditional form of address.

Mr. Peart: I am sorry, Mr. Deputy Speaker.
When we hear about charges of bad faith, that question should be examined by the Leader of the Opposition. It is accepted that we have conventions which make the House work, and since I have been Leader of the House I have tried to respect the Opposition, the Leader of the Opposition and, indeed, all hon. Members. I will go on doing that, despite misrepresentations in relation to my intervention during my controversy with the Leader of the Opposition when I announced Business. He ought to look at this matter. It was deplorable. I hope that there will be an apology?

Mr. Heath: What about?

Mr. Peart: Will the right hon. Gentleman offer an apology?

Mr. Heath: The Leader of the House knows full well that there was no official leakage on this matter of any kind whatever. The Leader of the House must ensure that these things are done through


the usual channels and not in the casual way in which they were done on this occasion, which resulted in information being passed in a way in which it became common knowledge. I say to him frankly that we always observe the conventions. I put this to the right hon. Gentleman: in answer to me on Thursday—

Mr. Peart: Mr. Peart rose—

Hon. Members: Sit down.

Mr. Deputy Speaker: Order. The right hon. Member for Bexley (Mr. Heath) has the Floor. If his intervention becomes too long, I will inform the House accordingly.

Mr. Peart: I gave way.

Mr. Heath: On Thursday I put this question to the Leader of the House:
Yesterday, I pressed the Prime Minister to say whether there would be a statement by him or the Chancellor of the Exchequer about further credit restrictions in the light of the categorical statement by the Secretary of State for Employment and Productivity…. Can the Leader of the House say again categorically that the Chancellor will not now be making a statement to this effect?
That referred to my previous remark about no limitation on credit. The right hon. Gentleman replied:
Certainly, because what my right hon. Friend the Secretary of State said was perfectly true.
He therefore said that there would not be a statement. The next day there was a statement.

Mr. Peart: I made the first statement about confidentiality. I now ask the right hon. Gentleman if he seriously believes that there was no leak.

Mr. Heath: There was no official leak.

Mr. Peart: I am talking about confidentiality. Is the right hon. Gentleman saying that his hon. Friend the Member for Louth was not informed by a certain person? I am asking for the right hon. Gentleman to investigate this. It is a serious matter. [HON. MEMBERS: "Get on."] I do not want an evasive reply and the Leader of the Opposition is being evasive. We went into this through the usual channels and showed all courtesy. This is deplorable. [HON. MEMBERS: "Hear, hear."]
As to my position as Leader of the House, I said, when the Leader of the Opposition questioned me:
I cannot…"—
answer—
at this stage. If a statement has to be made on a matter, I will make the necessary arrangement.
The right hon. Gentleman pressed me again and asked:
Will the right hon. Gentleman confirm that the Chancellor will not be making a statement?
I did not mislead the House. Later the hon. Member for Worcestershire—

Sir G. Nabarro: Worcestershire, South, if the right hon. Gentleman does not mind.

Mr. Peart: I hope that hon. Gentlemen opposite will let me proceed. I said that I thought that it was not a Business question, because Mr. Speaker had ruled that it was not in order. Then I rose and volunteered a statement because I was anxious to help. I said in reply:
If a statement is necessary, I will see that it is made."—[OFFICIAL REPORT, 31st October 1968; Vol. 772, c. 164–8.]
I cannot understand why the Leader of the Opposition and his hon. Friends have got themselves into such a frenzy about nothing. They seek to distort the position. [Interruption.] They seek to distort—

An Hon. Member: Lost the place? Start again.

Mr. Peart: There is no question of my having to start again. I believe that right hon. Gentlemen opposite have sought to distort the position, and I cannot understand why the Leader of the House has got himself into such a frenzy. [HON. MEMBERS: "Hear, hear."] I apologise. I should have said "Leader of the Opposition". After all, the right hon. Gentleman has not answered my charge. He knows that he cannot get away with this. I have asked him once and I repeat my claim that he should hold an inquiry.
I turn to the arguments that have been deployed. [Interruption.] When hon. Gentlemen opposite carefully read what has been said they will find that their leader's frenzied neurotic approach is not becoming of the Leader of the Opposition. [Interruption.]

Mr. Deputy Speaker: Order. Mr. Peart.

Mr. Peart: I cannot believe that hon. Gentlemen opposite honestly think that the hire-purchase restrictions amount to a new freeze.

Hon. Members: One hundred million pounds?

Mr. Peart: At a time when production, productivity and exports are rising and when unemployment is beginning to fall, one cannot describe as a freeze measures which are designed to act on £100 million out of a national income of £34,000 million to ensure that export orders are not frustrated by excess home demand. It cannot possibly be said that we are now in a position of a new freeze. That is what we have said over and over again. The right hon. Gentleman has exaggerated. I can almost imagine that if I gently embraced one of his lady colleagues, he would shout "Rape".

Mr. Mark Carlisle: Since the right hon. Gentleman is so vehemently denying the charge which has been made that he, the First Secretary and the Prime Minister deliberately misled the public in the statements they made, may I ask whether he proposes to issue writs for libel against the Sunday Express?

Mr. Peart: I do not know whether the hon. Member heard the speech this afternoon of the hon. Member for Bodmin (Mr. Bessell). The hon. Member put it right. When asked to say "Yes" or "No" in reply to a direct question, my right hon. Friend's reply was right in those circumstances. Of course it was right. Hon. Members know that. Therefore, this is not a freeze, as the hon. Member should know. I hope that right hon. Gentlemen opposite will realise that this policy of instant accusation based on ill-founded facts does them no good, neither can it reverse the present opinion poll trends of declining support for them. Most important of all, it is not worthy of the right hon. Member for Barnet.
On this point, as in their campaign against the two-tier postal system, I wonder why the party opposite have panicked into so desperately overplaying their hand. I believe that it is because they have not made fundamental criticisms. I got that impression when I listened to the speech this afternoon

by the right hon. Member for Enfield, West.
If I may deal now with the issues that the right hon. Gentleman and many hon. Members have raised, I will refer to an important matter which was raised by many of my hon. Friends. I refer to regional policies and employment. This is probably one of the most serious parts of our discussions today.
Regional development policy and planning have been key elements in the Government's economic policy ever since they came to power. For the first time, the problems of the regions are being tackled systematically and comprehensively. Our object has been to bring about a fairer distribution of economic opportunity and social conditions throughout the country. We also aim certainly to make use of the unused resources of the less prosperous regions for the benefit of those regions and the whole of the national economy.
I should like to record our appreciation of the work of the regional economic planning councils and boards. They provide effective machinery in the regions. We are having special studies from them which will enable decisions to be taken not only by the Government, but by local authorities and by industries.
I believe it right to concentrate in the first place on the development areas. We have to recognise that in the past their economy has declined or stagnated because of their heavy dependence on some of the older basic industries whose markets have changed and whose manpower needs are contracting. I know this problem very much because I represent a constituency in West Cumberland. The right hon. Gentleman today mentioned the problems of the Northern Region. I agree with him that they are very serious and they must be solved. They bear heavily on the individual worker and particularly on the mining community who have had to bear the brunt of change with colliery closures. Even in times of boom these areas have had unemployment levels twice the national average.
We recognise—this is mentioned in the Queen's Speech—that this is a very serious human problem and, above all, a waste of valuable manpower resources. It also creates major problems for the


proper maintenance of the economy in the more prosperous regions. The Government have done much to help development areas in the last three or four years and to attract more industrial development to them. This has been appreciated by hon. Members on both sides of the House.
We have had the special incentives under the local employment Acts and the Industrial Expansion Act and the radical step of introducing and guaranteeing for seven years the Regional Employment Premium; and the Selective Employment Premium has been retained for the development areas. Far greater resources are being put into training and retraining in development areas. Additional assistance has been provided for certain parts of the development areas, even areas within the designated special development areas such as Cumberland, and additional benefits are available there in the industrial projects. We have stressed the importance of this.
In winding up for the Opposition, the right hon. Gentleman mentioned the amount of aid. I shall give figures showing how these measures have transformed the scale of special assistance to development areas over and above what they receive in common with other parts of the country. The total has risen from under £30 million annually before 1965 to £300 million this year. It is too soon to assess fully the effect of all these incentives, particularly that of R.E.P., but inevitably this will have a tremendous effect on areas such as the Northern Region, Scotland, Wales and parts of the South-West. The development areas' share of all i.d.c approvals has been running at one-third of the national total so far this year. The Government are well aware of the importance of this matter.
My right hon. Friend the Member for Battersea, North (Mr. Jay), a former President of the Board of Trade, pleaded for more advance factories. He asked for figures. The position at 31st October was that 99 had been completed covering an area of 2,400,000 square feet and 80 of these have been allocated. Sixteen are under construction and a further 26 are to be planned. My right hon. Friend the Economic Secretary to the Treasury, in a Written Answer to my hon. Friend the

Member for Hampstead (Mr. Whitaker) announced a new programme to attack levels of unemployment in the regions this winter. The total amount which can be allocated for this purpose has had to be limited to £10 million, but it will be of considerable help in dealing with this problem and the Government consider that it should be a high priority.
Unemployment is still too high in certain areas. We are well aware of this. This is why we are tackling it through many of the measures I have mentioned.
As to strategy on many other issues, let us take the matter of prices and incomes, which was raised by the right hon. Gentleman when winding up for the Opposition and by many of my hon. Friends. No hon. Member is more anxious than my right hon. Friends and myself to finish with statutory controls, as long as other satisfactory arrangements take their place. The majority of hon. Members, even those opposite, know in their hearts that a return to the law of the jungle is not good enough.
Some have questioned whether all the agony has been worth while. It has been agonising to try to introduce some element of order in an area dominated up to now by the law of the jungle. They point to estimates that the Government's policy has restrained increases in prices and incomes by only 1 per cent. in its first year. While not necessarily accepting this figure, I must point out that such figures cannot be better than well-informed guesses, with wide margins of error. It is the last 1 per cent. which is vital. If we could increase our competitiveness in costs and prices by just 1 per cent. a year, our troubles would soon be over.
Some of my hon. Friends cannot accept the Government's policy on this, and to some considerable extent I sympathise with their objections. They are expressed in their Amendment. I believe, as they do, that the rights of free trade union bargaining had to be so bitterly fought for and were so dearly won that they will never be lightly set aside.
Trade unions, given the philosophy underlying their foundation, must never become in practice merely organisations whereby those with strength grab most without regard to the weaker. They were conceived, and must continue, as organisations where the strong help the weak,


with objectives designed to ensure economic justice. This is right. The time has come when we must think just how that philosophy should be applied in practice.
Half the hon. Members opposite, however, reject any form of policy and planning in relation to prices and incomes. If they had their way, many of them would go back to the unrestricted workings of the law of the market place. We last tried the unrestricted workings of that law in the 1930s. I believe that the nation has decisively rejected that course. When dealing with the livelihood of men and women we must never travel that way again.
I was asked by many hon. Members about import saving. The hon. Member for Worcestershire, South (Sir G. Nabarro) made a very effective plea for import saving. He made a strong defence of British farming. He addressed the question specifically to me because of my previous responsibility as Minister of Agriculture, Fisheries and Food.
The hon. Member seems to be under the impression that agriculture is not contributing to import saving. That is precisely why the selective expansion programme was brought in. I can remember the arguments which took place with hon. Members opposite who represent farming constituencies on this very matter. We said when we introduced the selective expansion programme that we expected that home agriculture would be able to meet the major part of the additional demand expected by 1970 totalling £200 million on food for human consumption. If the hon. Gentleman is looking beyond the period of the selective expansion programme he is a little premature. The Report of the little N.E.D.C. for agriculture has stated that an import saving of about £220 million should be technically feasible by 1972–73. We have taken this assessment into account in our studies.
On the other hand, the hon. Gentleman will appreciate that there are problems here in regard to import substitution. We are partners in many international agreements, some of which were put to the House by my predecessors but which we are continuing. I think of the bacon sharing agreement and the wheat agreement, for example. These

are important matters which have to be borne in mind. Neverthless, I believe that agriculture can make a major contribution, and, as we have said in the White Paper, and as I have repeatedly said to the industry—it was accepted—in order that growth in the industry may be achieved, the machinery for the purpose must be the Price Review.

Sir G. Nabarro: I accept absolutely the right hon. Gentleman's sincerity. But will he knock it into the head of the Chancellor of the Exchequer who is utterly urban-minded and introspective in these important matters? I sit for an agricultural constituency—

Hon. Members: Oh.

Mr. Speaker: Order.

Mr. Peart: The hon. Gentleman has forgotten. I gave a very good Price Review last year. I gave a very good Price Review the year before. Exchequer support was forthcoming. My right hon. Friend and his predecessor helped me to achieve it, and this was accepted by the farming community. The industry is not stagnating. It is increasing its production. [Interruption.] This is an important point, and I hope that hon. Members will forgive me for dealing with it.
There are many other important matters covered in the Queen's Speech which time does not allow me to develop. I think, for example, of aid for the fishing industry, another vital interest. Many economic measures are foreshadowed, and there is also the question of the set ting up of a Commission on the constitution. Here I pay tribute to the speech made by the Leader of the Liberal Party, although I did not agree with all of it. The right hon. Gentleman regards the setting up of the Commission as a matter of great importance. I pay tribute also to the speech of my hon. Friend—

Mrs. Anne Kerr: On a point of order, Mr. Speaker. It is impossible to hear what is being said, and among what some hon Members seem to think are unimportant questions there is a matter of considerable importance. I wish to ask why Miss Pat Arrow smith is in prison tonight. Having been fined £2 and having refused to pay


the £2, she has now been sent to prison for six months.

Mr. Speaker: Order. It would be no disservice to Parliament if we heard the last words of the debate. Mr. Peart.

Mr. Peart: I am sorry that I did not hear the question which my hon. Friend raised in her point of order.
We are now near the end of our debate on the Queen's Speech. The arguments which have been raised in regard to the proposed Commission will be carefully noted by the Government. We regard the setting up of the Commission as an important matter, and we shall speed up the talks on the terms of reference. [Interruption.] I hope that hon. Members will allow me to finish my speech. If they wish to be discourteous, I can do nothing about it, although I am sorry.

There remains much in the Queen's Speech to be debated and discussed, and there will be major debates on all these matters. Many people believe that the Queen's Speech will not impose heavy burdens on hon. Members. I assure the House that it is a heavy programme. There will be major pieces of legislation to be considered—the reform of the House of Lords, electoral reform, and many other matters which will have to be debated on legislation by the House itself. There will be a full period of work for hon. Members on both sides, and I hope that it will not be regarded lightly.

Question put, That the Amendment be made:—

The House divided: Ayes 247, Noes 310.

Division No. 4.]
AYES
[10.1 p.m.


Alison, Michael (Barkston Ash)
Dance, James
Hiley, Joseph


Allason, James (Hemel Hempstead)
d'Avigdor-Goldsmid, Sir Henry
Hill, J. E. B.


Astor, John
Dean, Paul
Hirst, Geoffrey


Atkins, Humphrey (M't'n &amp; M'd'n)
Deedes, Rt. Hn. W. F. (Ashford)
Hogg, Rt. Hn. Quintin


Awdry, Daniel
Digby, Simon Wingfield
Holland, Philip


Baker, Kenneth (Acton)
Dodds-Parker, Douglas
Hooson, Emlyn


Balniel, Lord
Donnelly, Desmond
Hordern, Peter


Barber, Rt. Hn. Anthony
Doughty, Charles
Hornby, Richard


Batsford, Brian
Douglas-Home, Rt. Hn. Sir Alec
Howell, David (Guildford)


Beamish, Col. Sir Tufton
Drayson, G. B.
Hunt, John


Bell, Ronald
Eden, Sir John
Hutchison, Michael Clark


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Elliot, Capt. Walter (Carshalton)
Iremonger, T. L.


Berry, Hn. Anthony
Emery, Peter
Irvine, Bryant Godman (Rye)


Bessell, Peter
Errington, Sir Eric
Jenkin, Patrick (Woodford)


Biffen, John
Eyre, Reginald
Jennings, J. C. (Burton)


Biggs-Davison, John
Farr, John
Johnson Smith, G. (E. Grinstead)


Black, Sir Cyril
Fisher, Nigel
Jones, Arthur (Northants, S.)


Blaker, Peter
Fletcher-Cooke, Charles
Jopling, Michael


Boardman, Tom (Leicester, S. W.)
Fortescue, Tim
Kaberry, Sir Donald


Body, Richard
Foster, Sir John
Kerby Capt. Henry


Bossom, Sir Clive
Galbraith, Hn. T. G.
Kershaw, Anthony


Boyd-Carpenter, Rt. Hn. John
Gibson-Watt, David
Kimball, Marcus


Boyle, Rt. Hn. Sir Edward
Giles, Rear-Adm. Morgan
King, Evelyn (Dorset, S.)


Brinton, Sir Tatton
Gilmour, Ian (Norfolk, C.)
Kirk, Peter


Brown, Sir Edward (Bath)
Gilmour, Sir John (Fife, E.)
Kitson Timothy


Bruce-Gardyne, J.
Glover, Sir Douglas
Knight, Mrs. Jill


Bryan, Paul
Glyn, Sir Richard
Lancaster, Col. C. G.


Buchanan-Smith, Alick (Angus, N&amp;M)
Goodhart, Philip
Lane, David


Buck, Antony (Colchester)
Gower, Raymond
Langford-Holt, Sir John


Bullus, Sir Eric
Grant, Anthony
Legge-Bourke, Sir Harry


Burden, F. A.
Grant-Ferris, R.
Lewis, Kenneth (Rutland)


Campbell, B. (Oldham, W.)
Gresham-Cooke, R.
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)


Campbell, Gordon (Moray &amp; Nairn)
Grieve, Percy
Lloyd, Ian (P'tsm'th, Langstone)


Carlisle, Mark
Grimond, Rt. Hn. J.
Lloyd, Rt. Hn. Selwyn (Wirral)


Carr, Rt. Hn. Robert
Hall, John (Wycombe)
Longden, Gilbert


Cary, Sir Robert
Hall-Davis, A. G. F.
Loveys, W. H.


Channon, H. P. G.
Hamilton, Lord (Fermanagh)
Lubbock, Eric


Chichester-Clark, R.
Hamilton, Michael (Salisbury)
McAdden, Sir Stephen


Clark, Henry
Harris, Frederic (Croydon, N. W.)
MacArthur, Ian


Clegg, Walter
Harrison, Brian (Maldon)
Mackenzie, Alasdair (Ross&amp;Crom'ty)


Cooke, Robert
Harrison, Col. Sir Harwood (Eye)
Maclean, Sir Fitzroy


Cooper-Key, Sir Neill
Harvey, Sir Arthur Vere
Macleod, Rt. Hn. Iain


Cordle, John
Harvie Anderson, Miss
McMaster, Stanley


Corfield, F. V.
Hastings, Stephen
Macmillan, Maurice (Farnham)


Costain, A. P.
Hawkins, Paul
Maddan, Martin


Craddock, Sir Beresford (Spelthorne)
Hay, John
Maginnis, John E.


Crouch, David
Heald, Rt. Hn. Sir Lionel
Marples, Rt. Hn. Ernest


Crowder, F. P.
Heath, Rt. Hn. Edward
Marten, Neil


Cunningham, Sir Knox
Heseltine, Michael
Maude, Angus


Currie, G. B. H.
Higgins, Terence L.
Maudling, Rt. Hn. Reginald


Dalkeith, Earl of






Mawby, Ray
Pounder, Rafton
Taylor, Sir Charles (Eastbourne)


Maxwell-Hyslop, R. J.
Powell, Rt. Hn. J. Enoch
Taylor, Edward M. (G'gow, Cathcart)


Maydon, Lt.-Cmdr. S. L. C.
Price, David (Eastleigh)
Taylor, Frank (Moss Side)


Mills, Peter (Torrington)
Prior, J. M. L.
Teeling, Sir William


Mills, Stratton (Belfast, N.)
Pym, Francis
Temple, John M.


Miscampbell, Norman
Quennell, Miss J. M.
Thorpe, Rt. Hn. Jeremy


Mitchell, David (Basingstoke)
Ramsden, Rt. Hn. James
Tilney, John


Monro, Hector
Rawlinson, Rt. Hn. Sir Peter
van Straubenzee, W. R.


Montgomery, Fergus
Rees-Davies, W. R.
Vaughan-Morgan, Rt. Hn. Sir John


Morgan, Geraint (Denbigh)
Renton, Rt. Hn. Sir David
Vickers, Dame Joan


Morrison, Charles (Devizes)
Ridley, Hn. Nicholas
Waddington, David


Mott-Radclyffe, Sir Charles
Ridsdale, Julian
Walker, Peter (Worcester)


Munro-Lucas-Tooth, Sir Hugh
Rippon, Rt. Hn. Geoffrey
Walker-Smith, Rt. Hn. Sir Derek


Murton, Oscar
Rodgers, Sir John (Sevenoaks)
Wall, Patrick


Nabarro, Sir Gerald
Rossi, Hugh (Hornsey)
Walters, Dennis


Neave, Airey
Royle, Anthony
Ward, Dame Irene


Nicholls, Sir Harmar
Russell, Sir Ronald
Weatherill, Bernard


Noble, Rt. Hn. Michael
St. John-Stevas, Norman
Webster, David


Nott, John
Scott, Nicholas
Wells, John (Maidstone)


Onslow, Cranley
Scott-Hopkins, James
Whitelaw, Rt. Hn. William


Orr, Capt. L. P. S.
Sharpies, Richard
Williams, Donald (Dudley)


Orr-Ewing, Sir Ian
Shaw, Michael (Sc'b'gh &amp; Whitby)
Wills, Sir Gerald (Bridgwater)


Osborn, John (Hallam)
Silvester, Frederick
Wilson, Geoffrey (Truro)


Osborne, Sir Cyril (Louth)
Sinclair, Sir George
Winstanley, Dr. M. P.


Page, Graham (Crosby)
Smith, Dudley (W'wick &amp; L'mington)
Wolrige-Gordon, Patrick


Page, John (Harrow, W.)
Smith, John (London &amp; W'minster)
Wood, Rt. Hn. Richard


Pardoe, John
Speed, Keith
Worsley, Marcus


Pearson, Sir Frank (Clitheroe)
Stainton, Keith
Wright, Esmond


Peel, John
Steel, David (Roxburgh)
Wylie, N. R.


Percival, Ian
Stodart, Anthony



Peyton, John
Stoddart-Scott, Col. Sir M.
TELLERS FOR THE AYES:


Pike, Miss Mervyn
Summers, Sir Spencer
Mr. R. W. Elliott and


Pink, R. Bonner
Tapsell, Peter
Mr. Jasper More.




NOES


Abse, Leo
Corbet, Mrs. Freda
Galpern, Sir Myer


Allaun, Frank (Salford, E.)
Craddock, George (Bradford, S.)
Gardner, Tony


Alldritt, Walter
Crawshaw, Richard
Garrett, W. E.


Allen, Scholefield
Cronin, John
Ginsburg, David


Anderson, Donald
Crosland, Rt. Hn. Anthony
Gordon Walker, Rt. Hn. P. C.


Archer, Peter
Crossman, Rt. Hn. Richard
Gray, Dr. Hugh (Yarmouth)


Armstrong, Ernest
Cullen, Mrs. Alice
Greenwood, Rt. Hn. Anthony


Ashley, Jack
Dalyell, Tam
Gregory, Arnold


Ashton, J. W.
Davidson, Arthur (Accrington)
Griffiths, David (Rother Valley)


Atkins, Ronald (Preston, N.)
Davies, Ednyfed Hudson (Conway)
Griffiths, Eddie (Brightside)


Atkinson, Norman (Tottenham)
Davies, G. Elfed (Rhondda, E.)
Griffiths, Rt. Hn. James (Llanelly)


Bacon, Rt. Hn. Alice
Davies, Dr. Ernest (Stretford)
Griffiths, Will (Exchange)


Barnes, Michael
Davies, Harold (Leek)
Gunter, Rt. Hn. R. J.


Barnett, Joel
Davies, Ifor (Gower)
Hamilton, James (Bothwell)


Baxter, William
Delargy, Hugh
Hamilton, William (Fife, W.)


Beaney, Alan
Dell, Edmund
Hamling, William


Bence, Cyril
Dempsey, James
Hannan, William


Benn, Rt. Hn. Anthony Wedgwood
Dewar, Donald
Harper, Joseph


Bennett, James (G'gow, Bridgeton)
Diamond, Rt. Hn. John
Harrison, Walter (Wakefield)


Bidwell, Sydney
Dickens, James
Hart, Rt. Hn. Judith


Binns, John
Dobson, Ray
Haseldine, Norman


Bishop, E. S.
Doig, Peter
Hattersley, Roy


Blackburn, F.
Dunn, James A.
Hazell, Bert


Blenkinsop, Arthur
Dunnett, Jack
Healey, Rt. Hn. Denis


Boardman, H. (Leigh)
Dunwoody, Mrs. Gwyneth (Exeter)
Heffer, Eric S.


Booth, Albert
Dunwoody, Dr. John (F'th &amp; C'b'e)
Herbison, Rt. Hn. Margaret


Boston, Terence
Eadie, Alex
Hilton, W. S.


Bottomley, Rt. Hn. Arthur
Edelman, Maurice
Hobden, Dennis


Boyden, James
Edwards, Robert (Bilston)
Hooley, Frank


Braddock, Mrs. E. M.
Edwards, William (Merioneth)
Horner, John


Bradley, Tom
Ellis, John
Houghton Rt Hn. Douglas


Bray, Dr. Jeremy
English, Michael
Howarth, Harry (Wellingborough)


Broughton, Dr. A. D. D.
Ennals, David
Howarth, Robert (Bolton, E.)


Brown, Rt. Hn. George (Belper)
Evans, Albert (Islington, S. W.)
Howell, Denis (Small Heath)


Brown, Hugh D. (G'gow, Provan)
Evans, Fred (Caerphilly)
Howie, W.


Brown, Bob (N'c'tle-upon-Tyne, W.)
Faulds, Andrew
Hoy, James


Brown, R. W. (Shoreditch &amp; F'bury)
Fernyhough, E.
Huckfield, Leslie


Buchan, Norman
Finch, Harold
Hughes, Rt. Hn. Cledwyn (Anglesey)


Buchanan, Richard (G'gow, Sp'burn)
Fitch, Alan (Wigan)
Hughes, Emrys (Ayrshire, S.)


Butler, Herbert (Hackney, C.)
Fletcher, Fit. Hn. SirEric (Islington, E.)
Hughes, Hector (Aberdeen, N.)


Callaghan Rt. Hn. James
Fletcher, Ted (Darlington)
Hughes, Roy (Newport)


Carmichael, Neil
Foot, Rt. Hn. Sir Dingle (Ipswich)
Hunter, Adam


Carter-Jones, Lewis
Foot, Michael (Ebbw Vale)
Hynd, John


Castle, Rt. Hn. Barbara
Forrester, John
Irvine, Sir Arthur (Edge Hill)


Chapman, Donald
Fowler, Gerry
Jackson, Colin (B'h'se &amp; Spenb'gh)


Coe, Denis
Fraser, John (Norwood)
Jackson, Peter M. (High Peak)


Coleman, Donald
Freeson, Reginald
Janner, Sir Barnett


Concannon, J. D.









Jay, Rt. Hn. Douglas
Millan, Bruce
Ryan, John


Jeger, George (Goole)
Miller, Dr. M. S.
Shaw, Arnold (Ilford, S.)


Jeger, Mrs. Lena (H'bn&amp;St. P'cras, S.)
Milne, Edward (Blyth)
Sheldon, Robert


Jenkins, Rt Hn. Roy (Stechford)
Molloy, William
Shinwell, Rt. Hn. E.


Johnson, Carol (Lewisham, S.)
Moonman, Eric
Shore, Rt. Hn. Peter (Stepney)


Johnson, James (K'ston-on-Hull, W.)
Morgan, Elystan (Cardiganshire)
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Jones, Dan (Burnley)
Morris, Alfred (Wythenshawe)
Short, Mrs. Renée (W'hampton, N. E.)


Jones, Rt. Hn. SirElwyn (W. Ham, S.)
Morris, Charles R. (Openshaw)
Silkin, Rt. Hn. John (Deptford)


Jones, J. Idwal (Wrexham)
Morris, John (Aberavon)
Silkin, Hn. S. C. (Dulwich)


Jones, T. Alec (Rhondda, West)
Mulley, Rt. Hn. Frederick
Silverman, Julius


Judd, Frank
Murray, Albert
Skeffington, Arthur


Kelley, Richard
Neal, Harold
Small, William


Kenyon, Clifford
Newens, Stan
Snow, Julian


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Noel-Baker, Francis (Swindon)
Spriggs, Leslie


Kerr, Dr. David (W'worth, Central)
Norwood, Christopher
Steele, Thomas (Dunbartonshire, W.)


Kerr, Russell (Feltham)
Oakes, Gordon
Stewart, Rt. Hn. Michael


Lawson, George
Ogden, Eric
Stonehouse, Rt. Hn. John


Leadbitter, Ted
O'Malley, Brian
Strauss, Rt. Hn. G. R.


Ledger, Ron
Orbach, Maurice
Summerskill, Hn. Dr. Shirley


Lee, Rt. Hn. Frederick (Newton)
Orme, Stanley
Swain, Thomas


Lee, Rt. Hn. Jennie (Cannock)
Oswald, Thomas
Swingler, Stephen


Lee, John (Reading)
Owen, Dr. David (Plymouth, S'tn)
Taverne, Dick


Lestor, Miss Joan
Owen, Will (Morpeth)
Thomas, Rt. Hn. George


Lever, Harold (Cheetham)
Padley, Walter
Thornton, Ernest


Lever, L. M. (Ardwick)
Paget, R. T.
Tinn, James


Lewis, Arthur (W. Ham, N.)
Palmer, Arthur
Tomney, Frank


Lewis, Ron (Carlisle)
Pannell, Rt. Hn, Charles
Tuck, Raphael


Lomas, Kenneth
Parker, John (Dagenham)
Urwin, T. W


Loughlin, Charles
Parkin, Ben (Paddington, N.)
Varley, Eric G.


Lyon, Alexander W. (York)
Parkyn, Brian (Bedford)
Wainwright, Edwin (Dearne Valley)


Lyons, Edward (Bradford, E.)
Pavitt, Laurence
Walden, Brian (All Saints)


Mabon, Dr. J. Dickson
Pearson, Arthur (Pontypridd)
Walker, Harold (Doncaster)


McBride, Neil
Peart, Rt. Hn. Fred
Wallace, George


MacColl, James
Pentland, Norman
Watkins, David (Consett)


Macdonald, A. H.
Perry, Ernest G. (Battersea, S.
Watkns Tudor (Brecon &amp; Radnor)


McGuire, Michael
Perry, George H. (Nottingham, S.)
Weitzman, David


McKay, Mrs. Margaret
Price, Christopher (Perry Barr)
Wellbeloved, James


Mackenzie, Gregor (Rutherglen)
Price, Thomas (Westhoughton)
Wells, William (Walsall, N.)


Mackie, John
Price, William (Rugby)
Whitaker, Ben


Mackintosh, John P.
Probert, Arthur
Whitlock, William


McMillan, Tom (Glasgow, C.)
Pursey, Cmdr. Harry
Wilkins, W. A.


McNamara, J. Kevin
Randall, Harry
Willey, Rt. Hn. Frederick


Mahon, Peter (Preston, S.)
Rankin, John
Williams, Alan (Swansea, W.)


Mahon, Simon (Bootle)
Rees, Merlyn
Williams, Alan Lee (Hornchurch)


Mallalieu, E. L. (Brigg)
Reynolds, Rt. Hn. G. W.
Williams, Clifford (Abertillery)


Mallalieu, J. P. W. (Huddersfield, E.)
Rhodes, Geoffrey
Williams, Mrs. Shirley (Hitchin)


Manuel, Archie
Richard, Ivor
Williams, W. T. (Warrington)


Mapp, Charles
Roberts, Albert (Normanton)
Wills, Rt. Hn. George


Marks, Kenneth
Roberts, Gwilym (Bedfordshire, S.)
Wilson, Rt. Hn. Harold (Huyton)


Marquand, David
Robertson, John (Paisley)
Wilson, William (Coventry, S.)


Marsh, Rt. Hn. Richard
Robinson, Rt. Hn. Kenneth (St. P'c'as)
Winnick, David


Mason, Rt. Hn. Roy
Rodgers, William (Stockton)
Woodburn, Rt. Hn. A.


Maxwell, Robert
Roebuck, Roy
Woof, Robert


Mayhew, Christopher
Rogers George (Kensington N.)
Wyatt, Woodrow


Mellish, Rt. Hn. Robert
Rose, Paul



Mendelson, John
Ross, Rt. Hn. William
TELLERS FOR THE NOES:


Mikardo, Ian
Rowlands, E.
Mr. Charles Grey and Mr. Ioan L. Evans.

Main Question put and agreed to.

Resolved,

That an humble Address be presented to Her Majesty, as follows:
Most Gracious Sovereign,
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave

to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.

Orders of the Day — DOUBLE TAXATION RELIEF

10.14 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever): I beg to move,
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Grenada) Order 1968 be made in the form of the draft laid before this House on 14th October, in the last Session of Parliament.

Mr. Speaker: It has been suggested to me—and I have no objection—that we should take together the four Double Taxation Orders which are on the Order Paper, if that is the will of both sides of the House.

Mr. Patrick Jenkin: We are entirely agreeable on this side of the House, Mr. Speaker.

Mr. Lever: I know that the House is eager to discuss the details of the four double taxation Orders and I am sure that they will be greatly convenienced by the decision that they should be discussed together. The Orders govern arrangements between this country, France, Sweden, Lesotho, and Grenada.
The fourth Order relates to a new comprehensive double taxation Convention with France. This is to replace the existing comprehensive Convention which was signed in 1950 and which is in need of revision following the changes in our tax system in 1965 and in the French tax system recently.
The new Convention with France is based on the model agreement recommended by the O.E.C.D. for adoption, and it follows generally the pattern of our other recent Conventions. I will not weary the House with a detailed exposition of the provisions, as the House has followed so closely similar provisions in previous agreements relating to other countries which I have had the pleasure of presenting to the House.
I might just mention the withholding taxes. The Convention provides as a general rule that the tax which can be charged in the source country is to be nil for royalties and limited to a maximum of 10 per cent. for interest and 15 per cent. for dividends. There is a

reduced limit of 5 per cent. for dividends received by a company with a holding of 10 per cent. or more in the paying company.
The Order relating to Sweden gives effect to a Supplementary Protocol amending the comprehensive Convention which was signed in 1960. The House will remember that this Convention has already been amended, following the changes in our domestic tax law in 1965, by a Protocol which was signed in 1966 and which withdrew from portfolio investors entitlement for relief for overseas company tax on the profits from which their dividends are derived. That is the underlying tax. The Supplementary Protocol now before the House completes the further modifications to the Convention arising out of our tax changes in 1965, and the amendments made by the Supplementary Protocol in general follow the recommendations of the O.E.C.D. and are in line with the pattern of other similar recent Conventions. Again I think it would be troublesome to go into the details, the House having these details so firmly in mind from the previous occasions when we have discussed them.
The new Supplementary Protocol with Sweden provides as a general rule that the tax which can be charged in the source country on dividends is limited to a maximum of 15 per cent., with a reduced rate of 5 per cent. for dividends received from a company with a holding of 25 per cent. or more in the paying company. Interest and royalties will in general continue as hitherto to be exempt from tax in the source country.
The Orders relating to Lesotho and Grenada are two more in the series of Orders relating to amending agreements with smaller Commonwealth countries. Like the other Orders in the series, their object is to withdraw from portfolio shareholders their entitlement to credit for tax on the profits out of which their dividends are paid.
I hope that these new double taxation arrangements, which I am sure hon. Members will have studied with close attention and interest, will meet with the approval of the House, but if I have failed to cover all the detailed and esoteric points I would be happy to answer the enquiries of hon. Members upon them.

10.20 p.m.

Mr. R. Gresham Cooke: Having just visited the charming island of Grenada, through the good offices of the C. P. A., I should like to ask the Financial Secretary two or three questions about this Order.
I am interested to know whether it will help British investment in the island. It is obvious that such investment is required for hotels, tourism, and, I think, for light industry. I was struck to find in one of the Windward Islands that the Americans were already getting on with sub-contracting work for light industries, and it seemed to me that here was a great opportunity for British investment. In one island, for example, the Americans had a little factory making or setting up Christmas cards. That seemed to be the sort of thing that could be done in Grenada.
These islands exist entirely on agriculture, the sale of bananas, nutmegs, man goes, and the rest of it. It is obvious that what is needed is technical schools and the knowledge to set up—

Mr. Speaker: Order. I, too, am interested in Grenada, but the hon. Gentleman must link his remarks to the Order before us.

Mr. Gresham Cooke: Of course, Mr. Speaker.
I wanted to ask the Financial Secretary whether the Order will help British investment to establish hotels, factories and other developments in the island of Grenada, which we all wish very well. I welcome the Order and hope that it will do good for the island. It is going through a difficult time, being entirely dependent on agriculture. It requires British technology and investment, and I hope that both will come through this Order.

10.22 p.m.

Mr. Patrick Jenkin: I am happy to follow my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) in pressing the Financial Secretary a little further on the Order relating to Grenada.
My hon. Friend has put his finger right on the point. It is the effect that the Order will have on British investment in the territory. It is a country where the tax system is not dissimilar from that

which we operated before we moved to the Corporation Tax system. Companies operating in Grenada pay a company tax, declare a dividend, and are entitled to recoup themselves by deducting from the dividend of the company tax which they have paid so that, in effect, it is passed on to the shareholders. But, of course, this is a company tax and not a true withholding tax, and the effect of the Order will be to deprive a British portfolio shareholder with a shareholding in Grenada from any doubt tax relief.
This is a matter which I raised when we debated the remainder of the Windward and Leeward Islands Double Taxation Orders in June of this year. Mr. Speaker, I apologise if I have to quote from my own speeches, but there are no others to which I can refer in the subject. I raised with the Financial Secretary the precise difficulty of these cases, of which there are many among the smaller territories of the Commonwealth, where the effect of the Orders is totally to deprive a portfolio shareholder from any relief in respect of tax paid in the overseas territory, for the reason that this is not a withholding tax but is treated for double tax purposes as an underlying tax.
When I raised the matter, I quoted to the Financial Secretary a passage from a speech made in 1966 by the hon. and learned Member for Derby, North (Mr. MacDermot), his predecessor as Financial Secretary, where he said when the point was made that it was the Government's intention to adopt a reasonably flexible attitude. I complained last June that when we had the first batch of double taxation conventions to which this point applied nothing had been done to give effect to that intention.
The Financial Secretary was good enough to acknowledge the point. He said:
I assure him "—
that is, me—
that in any future negotiations the closest regard will be paid to the point he has raised I will not use the word 'undertaking' in this connection, because I am sure that the hon. Gentleman rightly expects his comments to be sincerely taken into account by our negotiators."—[OFFICIAL REPORT, 14th June, 1968; Vol. 766. c. 621.]
All I can say is that here we have yet another example where, apparently, no account has been taken of the point raised on several occasions where the effect


would be to reduce the attractiveness of these territories for investment by British investors. The only result will be to leave the way wide open for investment from other countries. I hope that the Financial Secretary can give a rather more satisfactory explanation on this occasion as to why this has been done in this case.
I now turn briefly to the Swedish Convention. Here there is only article to which I draw attention—the new Article VIII(4), set out in Article 4. This provision has the effect of nullifying, in relation to Sweden, certain provisions of paragraph 1(1)(d) of the 11th Schedule of the Finance Act, 1965 and of making certain interest paid by British companies to Swedish associates a distribution and not a deduction for Corporation Tax. The Financial Secretary will be aware that these provisions of the 11th Schedule have aroused considerable irritation in industrial circles here, especially in terms of their effect upon companies that raise loans in Switzerland and elsewhere on the Continent. The hon. Gentleman will remember that we raised this matter in Committee and that our arguments were dismissed.
Here, in this Convention—and as far as I am aware this is the only Convention in which it appears—we find that this provision concerning paragraph 1(1)(d) is waived in relation to loans raised in Sweden. Why should there be a specific and specially favourable treatment of companies which borrow their money in Sweden rather than elsewhere? I expect the hon. Gentleman to say that we have to take the whole Convention together, but it comes as something of a surprise to find what was regarded by the Government as an important facet of the Corporation Tax reforms here being nullified in respect of one country.
I now turn to the French Convention—the most important of the four in that it is a new, comprehensive agreement and follows closely the O.E.C.D. model. There are one or two provisions which differ from that. Article 4 deals with the definition of the term "permanent establishment", and is, in general, in accordance with the Convention. Paragraph (7) of Article 4, dealing with insurance companies, is both new and outside the O.E.C.D. model. It provides that an insurance enterprise of one coun-

try will be deemed to have a permanent establishment in the other country if it collects premiums from or insures risks situated there. On the face of it, this would appear to impose a heavy new liability to French tax on the part of a British company establishing an office in France merely for the purpose of collecting premiums.
I have been given to understand that it is not the intention of the French authorities to enforce this new provision strictly according to its terms, but only if the activities of the branch companies go beyond mere routine administration and engage in what they describe as a habitual and normal commercial activity. I understand that they have also indicated that they would not regard the conduct of reinsurance business as making the branch liable for tax. This is a rather strange state of affairs. Here we have a provision of an Order which has been put before the House which, I understand, it is not the intention of the other contracting party to enforce according to its terms.
A number of questions arise. If this provision is not intended to be applied, why is it in the Order? What is the purpose of putting in stringent financial provisions if, at the same time, one of the parties will not enforce them? Secondly, what are the circumstances in which this provision will become strictly enforceable so that a branch will become liable to French tax if it merely collects premiums? I understand that our practice in the United Kingdom is that we will subject to tax a branch of a foreign insurance company only if that branch accepts proposals.
Can we, by a change in administration, which perhaps is all that it would amount to, so alter our practice that we would, as it were, provoke the French into applying this new provision strictly? Would it be, perhaps, only if we passed a law to change our treatment of branches of French insurance companies here that the French would be entitled, if that is the right word, to resile from the understanding which they have conveyed not to apply paragraph 7 strictly? What warning would be given to British insurance companies which have branches in France that their taxation treatment would be liable to be changed in what could be a stiff and swingeing way?


The third question which arises is how the Treasury intends to publicise what is tantamount to a major extra-statutory concession so that insurance companies may be aware both of the circumstances and of the waiver of the strict application and of the possible risks which they run of having the provision applied strictly in certain events. This is something new which I am not aware of having encountered in double taxation conventions before, a provision imposing an entirely new liability to tax but which, we are told, one of the parties has no intention of applying strictly from the outset. This requires explanation.
The effect of Article 10, a new article with which I do not quarrel, is to bring into taxation the profits of a branch operating in France of a United Kingdom establishment and to bring the taxation into line with what has always been the position of the taxation of the subsidiary operating overseas. It seems to me to be a move in the right direction that one should not have a major taxation difference between the operation of a branch and the operation of a subsidiary, because there may be very good commercial reasons why a branch is preferable to a subsidiary, or vice versa.
It seems to me, however, that the effect of this article is to swing the balance the other way. It appears that the curious formula that the
tax shall not exceed 15 per cent. of two-thirds of the profits of the permanent establishment after payment of the corporation tax on those profits
will have the effect of taxing branch profits rather more heavily than of taxing income from subsidiaries. I would be grateful if the Financial Secretary could confirm this and indicate the extent of the difference. Clearly, if it is merely a minimal difference, we would not take severe objection. If, on the other hand, it is one of substance, it requires explanation.
May I turn to Article 24 which introduces the new restriction on the relief for underlying tax for portfolio investment? This is now confined to direct investment, and the usual phrase appears in Article 24 (a) (ii) indicating the extent of that. But there seems to be an extra condition which I am not sure that I understand. It is certainly a new condition to me, and

I should be grateful if the Financial Secretary will explain it. It appears to apply so that there is a new condition which must be satisfied if Britain is to give relief for underlying tax in respect of a dividend paid by a French Company to a British parent. This new condition is related to the rate of tax charged on a dividend paid by the United Kingdom company to a French company and, furthermore, to the rate of tax in force at the date when the Convention was signed.
If there is an increase in the tax on a dividend paid by the British company to a French company, then, as a retaliation, as it were, the United Kingdom Revenue will no longer allow relief for underlying tax in respect of a dividend paid by a French company to a British company. In other words, this provides the British Revenue with a right of retaliation if the French increase their tax on a particular dividend above a certain level.
I can understand that from the point of view of the Revenue a right of retaliation of this sort may be a useful weapon in their armoury, but what is the effect on the individual investor—let us say on a company which has invested in France? Because the French increase their tax on dividends from Britain to France, the effect is to be that the British Revenue will increase its tax on a British company which has invested in France. That seems to be an extraordinary process of robbing Peter to pay Paul, and to require some justification.
One or two questions come to mind. Will this be an automatic retaliation if the condition ceases to be satisfied and France raises the appropriate level of tax above the level at the date on which the Convention was signed, or is there some discretion in the Revenue to decide whether to invoke the condition? Suppose we reduce the rate of withholding tax—which is not impossible—on dividends paid by a British company to a French parent, with the result that the amount of tax against which double taxation relief will be available in France has been reduced, and as a result the French think it right to recoup to themselves the difference. After all, we shall have done exactly the same thing in the opposite direction. Would this happen without provoking the retaliation?


By relieving a French investor in this country of certain of the tax, could we find ourselves obliged because of this condition in Article 24(a)(ii) to impose additional tax on a British investor in France? If so, that seems to be an astonishing result of this provision. It seems to me a very strange proposal, which is liable to give rise to some uncertainty.
As the House is aware, there is a good deal of mutual investment—it is growing, and I welcome the fact—by French companies in this country and by British companies in France, which offers many attractive opportunities within the Common Market. I feel that the Government should make it entirely clear where they stand on this point.
Next, I raise again a small issue which I have raised before—that concerning retrospection, which occurs under Article 30(1)(a). It will be seen from that paragraphs (i), (ii) and (iii) that this is to apply to tax in one case going back to April, 1966. It will be seen that from April, 1966, in respect of Corporation Tax going back to April, 1964 and in respect of Capital Gains Tax going back to April, 1966. Having read paragraph (2), I am aware that there is a saving provision that nobody will be forced to pay any more tax as a result of the retrospection. That is to say, if the effect is to increase liability, it is not to increase liability back beyond the date of the Convention. Nevertheless, this is strictly retrospective fiscal legislation. The mere fact that there is a relieving provision to prevent anybody from having an increased liability does not detract from this principle.
We have had a number of Conventions, since I last raised the complaint of Conventions being supposed to apply from the date on which they took effect, and this principle has been accepted by the Treasury. I regard this as an infinitely preferable form of delegated legislation. I dislike this business of our nearly being in 1969 and having a provision which says that it shall apply to Corporation Tax going back to the financial year beginning 1964, nearly five years ago.

10.41 p.m.

Mr. Harold Lever: With the leave of the House, I will answer the many interesting points that have been raised.
First, however, I must congratulate the hon. Member for Twickenham (Mr. Gresham Cooke) on his maiden speech on behalf of, as far as I know, all back benchers opposite on this subject, the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) otherwise having a monopoly in the conduct of these affairs.
I was asked what would be the effect of the Lesotho and Grenada Orders on investment incentives for British investors to encourage growth, manufacturing and so on in those countries. The answer is that, for practical purposes, these Instruments will not in any way deter investors. It is true that, somewhat pedantically, we have in the treaty underlying tax rules which apply everywhere else, but in fact in these countries that will have no importance because they are concerned only with portfolio investment.
As hon. Gentlemen opposite know, once there is any direct investment or other such consideration in the country, the underlying tax is available; and, in these circumstances, we need not worry unduly. I might add that there is not a lively stock exchange in either country.

Mr. Patrick Jenkin: That is not the point.

Mr. Lever: The hon. Gentleman obviously prefers pedantic abstraction to reality.
If one is talking about investment in these charming places, one is talking not of portfolio investment but of direct investment or investment which, at the least, will represent 10 per cent. of the share in the company. That sort of investment gets the underlying tax advantage which the hon. Member for Twickenham is anxious it should have. If there were a stock exchange in one of these countries and somebody bought less than 10 per cent. of the shares in a local company, he would suffer a disadvantage compared with the position that used to prevail before the 1965 Act.

Mr. Gresham Cooke: If a British hotel company put 50 per cent. into building a hotel in Grenada, the other 50 per cent. being supplied from local sources, would that company obtain the full advantage from double taxation relief?

Mr. Lever: It would get the full advantage. Portfolio investment would not, as I explained, get that advantage.

Mr. Patrick Jenkin: If a consortium of 12 hotel companies, which is not an impossible venture, were to invest directly in Grenada in equal shares, that advantage would not be obtained. The figure of 10 per cent. is arbitrary and to talk about there being no flourishing stock exchange in Grenada is begging the point.

Mr. Lever: That intervention is an exercise in hypothetics; in other words, those dangers which might theoretically exist but which never do. If the hon. Gentleman will provide me with details of a consortium of 12 hotel companies which have gone into syndicate in equal shares in Grenada, I shall be happy to look at the whole matter again. Indeed, I give the hon. Gentleman an undertaking that if he can provide me with such an example, I will seriously consider renegotiating the Convention. In the first instance, however, he must provide this interesting syndicate not too artificially conjured together.
I know that the hon. Member for Twickenham, who is more interested in the practical side, is relieved to know that, if he has as little as a 10 per cent. shareholding, he will get the full relief for the underlying tax. There may be a garden in Granada, but there is no stock exchange in Grenada, so the portfolio relief is not relevant to this matter.
The hon. Member raised other points of great interest. I will deal, first, with the Swedish Convention. What seems to trouble him on the new Article VIII (4) is that we have made a concession which he and his hon. Friends pressed for in debates on the 1965 Finance Bill, and which, he says, we are making exceptionally in the case of Sweden. It is almost a relief to find that the hon. Member, who has more knowledge of these treaties, I think, than any other hon. Member, including the Financial Secretary, should be in error here. This is not exceptional. The main countries where the same provision applies are Switzerland, the United States, Belgium and Australia. So he will be gratified to know that, in implementing it in the case of Sweden and other countries, we are meeting a great deal of the Opposition's case on the Finance Bill.
It will not have escaped the hon. Member's attention that all these

countries have a well ordered tax system of their own and fairly normal rates of tax prevailing, so it will not lend itself to mere channelling of income from the British company into a tax haven or anything of that kind. This is a reasonable provision. The hon. Member wanted it to apply generally. We have applied it pretty generally to the main countries, and where we can get reciprocity and it is appropriate, we are happy to apply it to any country.
The hon. Member mentioned the French treaty. Article 4(7) deals with incomes. All these treaties are a matter for negotiation and give and take. We cannot dictate them, but must reach agreement with the other side, in this case the French Government. They insist that all their double taxation agreements should have this somewhat strangely worded clause, but do not enforce it strictly, so far as an Englishman reading the translation from the French in this Convention would understand it.
We are glad that that is so. We had to accept the Clause and have every reason to think that it will not be troublesome to British insurance companies, which, happily, will not need a great deal of publicising of this, because they are frequently aware of the situation over a long period and there is little danger of any of them not being aware of this. Perhaps we can discuss outside the Chamber the suggestion that we should be more active in informing insurance companies. We have no option in the matter.
On Article 24 (a) (ii), it is true that, if the French Government increase their tax system and make it more burdensome, we will be entitled to alter our arrangements in relation to the British investors in France. This is not as strange as the hon. Gentleman seemed to think. At first sight, I agree, it does seem a little odd that because the French impose more tax on their own citizens investing in England, we should impose more on an Englishman investing in France, but it is not so strange, because the whole object of these treaties is to encourage the free play of investment and mutuality is at the heart of it.
The hon. Member should welcome anything inclined to deter the French Government from treating people who invest in this country more severely than they


do at present, because, as he said, it is highly desirable that the French should be encouraged to invest here. This provision is simply to say that we shall have the right, if the French taken steps—it is not automatic—which we sincerely hope they will not and which we have no reason to suppose they will, which would disincline Frenchmen from investing here, we might correspondingly, if we thought it right, take steps to discourage British investment in France. This is all in the interests of mutuality and of encouraging the two-way flow of investment which the hon. Gentleman has more than once welcomed.
The hon. Gentleman's last point was the question of retrospection. On this, I must be absolutely plain. We have not retrospected, because restrospection means that we enforce the law on people in respect of a past situation against their wish. Far from that, what we have done is to establish a law in respect of past dividends which investors may apply if they wish. If they prefer to operate the law as it was in the past, they have the absolute right to do it.
That is not retrospection. That is simply instituting a new system of law. For convenience we say to the investor, "You may, if you wish, in respect of the past operate the law which existed in the past." We think it convenient for most people to operate the new law even in respect of past dividends. If they do not like it, they do not have to do it. With that kind of retrospection one is tempted to recall the old joke—"With such an enemy you do not need a friend."
Here the Government are not acting to penalise the investor. The Government are not acting retrospectively to enforce upon him something to his disadvantage or even to his advantage. They simply offer him a new code of law to apply to these dividends. If he does not want it in respect of past dividends, he can operate the old law. That is neither offensive nor retrospective. In these circumstances, I have no hestitation in commending the four Orders to the House.

Question put and agreed to.

Resolved,
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Grenada) Order

1968 be made in the form of the draft laid before this House on 14th October, in the last Session of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.

Resolved,
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Lesotho) Order 1968 be made in the form of the draft laid before this House on 14th October, in the last Session of Parliament.—[Mr. Harold Lever.]

To be presented by Privy Councillors or Members of Her Majesty's Household.

Resolved,
That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of the Kingdom of Sweden, of the Supplementary Protocol set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Sweden) (No. 2) Order 1968, a draft of which was laid before this House on 26th August, in the last Session of Parliament, an Order may be made in the form of that draft.—[Mr. Harold Lever.]

To be presented by Privy Councillors or Members of Her Majesty's Household.

Resolved,
That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (France) Order 1968 be made in the form of the draft laid before this House on 16th July, in the last Session of Parliament.—[Mr. Harold Lever.]

To be presented by Privy Councillors or Members of Her Majesty's Household.

Orders of the Day — ELECTRICITY (SCOTLAND) BILL

Order for Second Reading read.

Bill referred to the Scottish Grand Committee.—[Dr. Dickson Mabon.]

Orders of the Day — SCIENCE AND TECHNOLOGY

Motion made, and Question proposed,

That a Select Committee be appointed to consider Science and Technology and to report thereon from time to time:

That Dr. Ernest Davies, Mr. Ray Dobson, Mr. David Ginsburg, Mr. Arnold Gregory, Mr. Stephen Hastings, Mr. Robert L. Howarth, Sir Harry Legge-Bourke, Mr. Eric Lubbock, Mr. Eric Moonman, Mr. Airey Neave, Sir Ian Orr-Ewing, Mr. Arthur Palmer, Mr. Brian Parkyn and Mr. David Price be Members of the Committee:

That the Committee have power to send for persons, papers and records, to sit notwithstanding any adjournment of the House, to adjourn from place to place, to admit strangers during the examination of witnesses


unless they otherwise order, and to report Minutes of Evidence from time to time:

That Four be the Quorum:

That the Committee have power to appoint Sub-Committees and to refer to such Sub-Committees any of the matters referred to the Committee:

That every such Sub-Committee have power to send for persons, papers and records, to sit nothwithstanding any adjournment of the House, to adjourn from place to place, to report to the Committee from time to time, and to admit strangers during the examination of witnesses unless they otherwise order:

That Three be the Quorum of every such Sub-Committee:

That the Committee have power to report from time to time the Minutes of the Evidence taken before such Sub-Committees and reported by them to the Committee:

That during the present Session the Committee have power to appoint persons with technical or scientific knowledge for the purpose of particular inquiries, either to supply information which is not readily available or to elucidate matters of complexity within the Committee's order of reference:

That the Memoranda laid before the Committee in the last Session of Parliament be referred to the Committee.—[Mr. O'Malley.]

10.55 p.m.

Mr. Alick Buchanan-Smith: I have no intention, of course, of opposing this Motion, but I seek clarification about it. I am particularly curious to know why the Government have chosen on this occasion to appoint this Select Committee instead of other Select Committees at the same time. My particular interest is in relation to the Select Committee on Agriculture, which was appointed in the last Session and has not completed its work.
When that Committee was appointed it was several weeks after the beginning of the last Session with the result that the effective work of the Committee could not begin until after Christmas, so two or three months of last Session were wasted before the Committee could begin to work. That Committee is charged with an important task, as is the Committee on Science and Technology. If such Committees are to discharge their duties, it is vital that they should have sufficient time to do so.
These Select Committees are the result of some of the reforms brought in by the former Leader of the House, reforms

which I support. The Select Committee on Agriculture is in the middle of extremely important work in relation to the rôle of agriculture in the economy and the part which the industry can play in supporting the economy of the nation.

Mr. Deputy Speaker (Mr. Harry Gourlay): Order. The hon. Member must know that this is not a matter for debate. He can put a question, but I hope that he will do so briefly.

Mr. Buchanan-Smith: I had nearly completed what I had to say, Mr. Deputy Speaker.
I am interested to know why this one Committee is being appointed while another Committee which is in the middle of its work is not appointed at the same time. The Select Committee on Agriculture held its last meeting in the last week of the last Session. Why is it not being reappointed now?

10.57 p.m.

Mr. Brian O'Malley (Lord Commissioner of the Treasury): I understand and appreciate the interest of the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) in the Select Committee on Agriculture. As he said, at the beginning of last Session there was a delay of several weeks before that Committee was set up. I hope that he will be satisfied when I give the assurance that there will certainly be no undue delay of that kind again in setting up that Committee. I am hopeful that it will be set up within the next few days.
The hon. Member asked why only the Motion for setting up this Committee on Science and Technology appears on the Order Paper, but it is not the only one for there was another Motion at the beginning of business today. I think that he will find that there will be a number of Motions to set up such Committees appearing on the Order Paper. There is no significance in the fact that only two appear today; it is merely a matter of administrative convenience. With the assurance that there will be no delay in setting up the Select Committee on Agriculture, I hope that the hon. Member will allow this Motion to be passed.

Question put and agreed to.

Orders of the Day — THE UNMARRIED MOTHER

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

10.59 p.m.

Miss Joan Lestor: Much of what I have to say in this debate in reference to the unmarried mother includes the unsupported mother as well. I am particularly concerned with the latter category. In view of the increasing number of young women who find themselves in the position of trying to bring up a child of their own, I think that the attention of the Department and the Government should be drawn to the increasing problems facing them.
From time to time public conscience is stirred when sociologists and social workers draw attention to the situation of the unsupported unmarried mother. Many people pay lip-service to the difficulties and make suggestions about solutions. Then we forget all about it for a time and assume that the problem no longer exists.
Many of the problems to which I shall refer are not new. It is also true to say that great strides have been taken in changing attitudes compared with what they were in the past when the child was blamed for what many consider to be the crime of the parents. In this respect, I was particularly pleased to see in the Gracious Speech reference to the law of inheritance with respect to illegitimate children and to learn that a proposal will be put before this House to bring the law into line with that applying to legitimate children. Of course, this is a step in the right direction.
In trying to deal with these problems we are indebted to the National Council for the Unmarried Mother and her Child. We ought to be concerned with the fact that the present financial position of this organisation is critical. If it is to continue the work that it does in helping so many young girls who arrive on its doorstep with their suitcases and carrying a child, it must be given financial support, and this support must be increased if it is to be assured of a future stable existence.
I have with me some figures of illegitimacy. First, I think that most people

are aware that in this country last year nearly 70,000 babies were born outside of marriage. That is 8·4 per cent. of all live births, or, in other words, one child in 13 in England and Wales is born of unmarried parents. This figure is high. But, having said that, it is important to point out, as some of us pointed out when the Divorce Bill was under discussion, that many of these illegitimate births are the result of stable unions. They are not all the result of the situation with which I am mainly concerned tonight. The figures, therefore, have to be interpreted with that fact in mind.
I wish to draw attention to the report that was published on the health of the school child and which laid particular emphasis on the problem—although it has been exaggerated, as the report showed—of the schoolgirl who has a baby. The report goes a long way to destroying the idea that sexual promiscuity is excessive among boys and girls still at school. It also destroys the idea that those with knowledge are the ones who usually get themselves into trouble. In fact, it highlights what we ought to be concerned with, that it is often the young girl from the inadequate home and inadequate background who finds herself pregnant while still at school.
Nevertheless, the incidence of pregnancy among school girls is high enough for those of us here and others in responsible positions in schools and clinics seriously to consider whether enough is being done in our schools to deal with the difficult problems of sex and of growing up.
One of the points that I want to emphasise is the main problem affecting all unsupported mothers, namely, accommodation. We need to find out what are the policies of our local authorities in relation to the unsupported mother. How does the points system work in relation to a single mother with one child? Does she lose out because she is a single mother, as against married parents, although their housing needs may be exactly the same? Do some authorities, as I fear they do, still take the view that to house the unmarried mother is to encourage others to follow her example and is, in effect, a condoning of what she has done?
The real tragedies to which I draw my hon. Friend's attention begin when some


young girls leave the mother and baby homes and their babies are about six weeks old. They have to find accommodation. Much the same problem may well arise a few months later, when the baby is a little older. Statistics show that the unsupported mother has three times more chance of becoming homeless than has the normal family, and this difficulty affects the unmarried girl even more acutely.
We must find ways of increasing the provision of short-stay housing and of providing good low-rent accommodation for people in this situation. Let us remind those who regard such provision, as many do, as an expense on the community that the inadequate home and the deprived child from such homes in the end cost the community far more than the offering of cheaper accommodation and better facilities in the first place.
Anyone who has traced the history of some of the sad cases of children of unsupported mothers knows how the tragic pattern of the inadequate home produces the inadequate child, who, in turn, produces the inadequate home and again the inadequate child. The sad tales goes on endlessly. The case histories of our children's homes, our remand homes and approved schools and our prisons are so often the results of inadequacy in early years.
The connection between inadequacy and illegitimacy or the circumstances of the unsupported mother was shown by the findings of the Seebohm Committee. If we allow the social conditions in which these children are brought to be worse than the conditions in which those whom we choose to call legitimate are brought up, they will be at far greater risk of coming into care and becoming social misfits.
The Seebohm Report deals with this aspect of the matter at some length. It points out that the number of illegitimate babies coming into care between 1963 and 1966 was rising by roughly 800 a year. The cause of their coming into care was not illegitimacy; it was their mothers' lack of the means to maintain them in their own homes. It is a terrible reflection on us all if we force a young girl or a woman who has a child to give it up or put it into care simply because

we do not provide the necessary support in terms of finance and accommodation.
I hope that we shall have opportunity on another occasion to discuss at greater length the complex problem of fostering. Sometimes, after several years, a child becomes involved in a tug-of-war between the foster parents and its mother. Sometimes, they are children of deserted mothers or were born before their mothers were married, and the mothers are able to establish a home a few years later.
In many cases, the mother really believes that her child will have to stay in the care of the local authority or of foster parents for only a short period. But time runs on, and then one finds the child being taken from foster parents with whom it has been for as long as eight or ten years and put back with its own parents—or one new parent and its mother—whom it does not really know and from whom it has lost all contact.
If, because of inadequacies in our social services available to the unsupported mother, we encourage this situation to arise or fail to check it, we bear a heavy responsibility. We must do better. Many of the mothers I have come across who have been faced with a contest over the moral right—to call it that—of the foster mother as against their own legal right originally intended that their children should stay in care for only a short time, but, because of bad housing and the other problems confronting them, they were not able to take them back into their own homes. We need particularly to look at the problems of the unsupported mother and her children in the long school holidays, when she must continue to work but the children need to be looked after.
Perhaps we could look with interest and support at some of the housing projects that have sprung up during the past few years to help the unmarried mother, very often through voluntary organisations that have put forward imaginative schemes to local authorities and asked for help. Some local authorities have been very forthcoming with assistance to mother-and-baby homes and hostels that provide facilities to help girls keep their babies and go out to work at the same time. But some refuse to help in getting these projects off the ground.


If the Government could consider offering assistance in this connection we could begin to move along the right road.
It is very important that, whatever a girl decides to do with her baby, in the end she is not forced to make a decision that she does not want to make, because she cannot keep her child owing to housing or financial difficulties. Many people in that situation will decide that adoption is the best solution. It may well be, but to force such a person to make a decision against her will is something that many of us would feel very guilty about.
There is also the question of financial arrangements for unsupported mothers, and this does not apply only to the unmarried mothers. No doubt we shall be able to discuss this subject more fully another time. A little while ago the Lord Chancellor dealt in another place with the question of the unmarried mother receiving National Assistance. The figures showed that of those concerned about 17 per cent. had no hope of ever getting a court order; about 35 per cent. had not been able to prove entitlement; and in about 3 per cent. of cases there was no arrangement for payment because no financial payment was available. If we could start to think of other means whereby unmarried and unsupported mothers could get maintenance and support for their children, we should be moving in the right direction.
I received today a letter from a constituent who had noticed that this was the subject of an Adjournment debate. He told me that his 16-year-old daughter, a schoolgirl, was pregnant, and wrote of the distress, shock and misery this was causing to his family and daughter. He blamed the permissive society, the accent on sex, and all the things we have heard blamed so much. It is not for me or anybody else here to start trying to say who or what is responsible for young girls who find themselves in that situation. But in a sense all of us are responsible for what happens, particularly to young people and the inadequates in our society. If they are inadequate, it is in a sense society that has made them inadequate. We must try to find ways and means of redressing the balance of the inadequacy which has caused many young unmarried mothers to find themselves in that situation.

11.20 p.m.

The Under-Secretary of State for the Department of Health and Social Security (Mr. Julian Snow): I am much obliged to my hon. Friend the Member for Eton and Slough (Miss Lestor) for raising this matter. I know of her specialised knowledge of this matter. I will try to deal with all the points that she has raised, but this may not be absolutely possible in the short time that I have at my disposal.
There are many problems which beset the unmarried mother. She needs an adequate health service; appropriate accommodation, whether a home temporarily or long-term housing within the community; social support, including advice about the unmarried mother's legal rights; support to assist her in resuming her place in the community after her child is born; and adequate means.
The expectant mother needs social support during the time before and immediately after the baby's birth, when she has to take difficult decisions about her own and the child's future. She may receive the support she needs from any one of a number of agencies, including her general practitioner, the local health authority through its local welfare department, child guidance clinic or maternity services or perhaps from a moral welfare worker. Perhaps on the other hand she will go to the National Council for the Unmarried Mother or another voluntary body. Voluntary organisations do a large part of this work, but I hope that in the time to come we shall see local health authorities doing more.
All these services have to be seen against the unfortunate background of the ambivalent attitude of society. The unmarried mother continues to occupy a lowly place in the scale of public tolerance, and, although public attitudes are changing, the tempo of reform is very slow.
Much of the reform that has so far been brought about has been due to the efforts of the voluntary bodies active in the field, and I would at this point like to refer particularly to the work of the National Council for the Unmarried Mother and her Child, to give it its proper and full title. The Council acts as an advisory and co-ordinating body in the


field of illegitimacy, campaigns for improved social services for unmarried mothers and their children, presses for changes in the law where necessary, and promotes public understanding of the problems of illegitimacy.
It is particularly timely that I should pay tribute to the National Council at the present time for it is celebrating its golden jubilee this year and will be holding its golden jubilee annual general meeting on the 21st and 22nd of the month. Society is much indebted to it for all that it has done in this sphere of work during the past 50 years. I understand that it is launching an appeal to try to rectify its financial problems, and we shall be watching the results of it very closely.
I would also like to pay tribute to the voluntary societies, many of them church organisations, active in this field. Although they would share with me the feeling of regret that it should be so, there is no doubt that greater calls than ever before will be made on their services in the future. I am confident that they will respond to these calls.
I think that I should also mention at this point the finding or recommendation of the Seebohm Committee, in paragraph 211:
The risks to which the young illegitimate child is exposed are greater than those faced by legitimate children and they are likely to need more help from the social service department. Likewise unmarried mothers also need special assistance. Where they retain their children and look after them, help is necessary in the form of guidance, accommodation and in ensuring adequate income. We recognise the outstanding pioneering work which has been done by voluntary bodies in this field, particularly religious organisations, and there is no suggestion that they be superseded. But we do recommend that, first, there should be a realistic alternative sources of assistance to those unmarried mothers who do not wish to approach religious bodies and, second, that there should be a clear assignment of responsibility to the social service department for ensuring adequate social care and advice for both the unmarried mother and her child.
I have read that paragraph because I feel that what the young unmarried mother really wants is not merely to know that there are certain services available but some social worker on whose shoulders she can cry and unburden her soul. I have in mind a typical case of the young girl from the provinces who

comes to London, occupies a bed-sitter, finds herself pregnant and then is lost because she is out of touch with her family, is not associated with any particular body and has nobody to advise her responsibly.
The public bodies who play the major part in dealing with the problems of the unmarried mother must necessarily be the local authorities. But, apart from promoting the expansion of local authority services for the unmarried mother and direct forms of assistance such as the payment of supplementary benefit, central Departments also contribute directly in various way—for example, an annual grant, which was more than doubled two years ago, is paid by my Department to the National Council.
Local authorities make provision for unmarried mothers in a variety of ways. The services provided by local health authorities for all mothers are equally available to the unmarried mother. The problem is, of course, to ensure that their services are adequately used by unmarried mothers, who, with their babies, have been shown to be at special medical risk. The relatively high rates for infant and perinatal mortality in these groups suggest that they tend not to take advantage of the ante-natal services until a very late stage in their pregnancy. The adverse effect of illegitimacy on the outcome of pregnancy is well known.
Local health authorities also provide accommodation for the unmarried mother, either themselves or by arrangement with voluntary agencies. The day care needs of pre-school children of unsupported mothers, a large proportion of whom are unmarried, are given priority, and they will benefit from the considerable extra amount of day nursery building by local health authorities, assisted by a new Government grant, to which I referred at Question Time yesterday.
Apart from problems arising over accommodation, we must ensure that the unmarried mother does not, under stress, neglect her health and that of her child, that she is able to find out without too much difficulty what services exist to help, and that skilled help and support is available to her for as long as she needs it while she is deciding upon her child's and her own future.
Here, I should like to make a brief reference to the conclusions of the Seebohm Report, one of which I have already quoted, on the personal social services. Whatever decision may eventually be taken by the Government on the Report's central recommendation that there shall be a family oriented social service department within the local authority structure, I am confident that one of the categories of persons that will directly gain from any arrangement made will be the unmarried mother and her child.
I must emphasise that I think this link between a girl in trouble and what the local authorities can do is one of the answers we have to find in the provision, in due course, and as quickly as we can, of more social workers of the right type. In the case of social work services, authorities have tended in the past to discharge their responsibilities by delegating the care of unmarried mothers to voluntary agencies. Particularly is this so for the one-sixth of unmarried mothers in any given year who are accommodated in mother and baby homes. This aspect of the services for unmarried mothers has been the subject of a recent study and fine report by Mrs. Jill Nicholson, a research worker, on behalf of the National Council, which is at present under consideration.
In the field of housing, the Minister of Housing and Local Government's Central Housing Advisory Committee, in a report sent to all housing authorities in 1955, and again, in a joint circular with the Ministry of Health and Home Office in September, 1967, drew attention to the housing difficulties which confront "unsupported" mothers and suggested that councils should, in the interests of the children, offer such families some of their lower-rented accommodation. There are also 16 housing associations, set-up wholly or partly to assist unmarried mothers and affiliated to the National Federation of Housing Societies.
On the question of financial assistance to the unmarried mother, it is axiomatic that life will seldom be easy for mothers who have to bring up a young family without a husband's support. But owing to the supplementary benefits scheme, there are today about 180,000 "father-

less" families, containing 340,000 children, who enjoy a degree of financial security unknown to previous generations, and unmarried mothers account for some 50,000 of these families.
These benefits must continue to be reviewed from time to time to take account of the rise in the cost of living and the improved circumstances with which we would like to surround the unmarried mother.
I would be glad to write to my hon. Friend and give her examples of the sort of income of this nature which is at present being provided, but I ask her to believe that this is not the end of the story. I hope that there will be further improvements in due course.
It is no part of my task today to make suggestions about the prevention of illegitimacy, but there is no doubt that a need exists to give young people advice and instruction about personal relationships, i.e., dealing with the emotions and responsibilities of the whole relationship between the sexes and not with physiology alone. An understanding of this is a basic essential for living happily in a community. We have to face the fact that numbers of our young people engage in pre-marital sexual intercourse and will continue to do so. But I hope that all who may read my speech and that of my hon. Friend will rid their minds of any question of moral rectitude in dealing with this problem.
There is no doubt that in the future we can look forward to increasing provision by both central and local government for the needs of unmarried mothers. There is need for an increased number of trained social workers, and I would hope that local authorities will play an increasing part in this problem.
My hon. Friend referred to illegitimacy rates, and also to the question of the very young girl who becomes pregnant. There is a special need for provision for this latter category, and the likelihood is that the children's department will be concerned here and will provide guidance and assistance under the Children and Young Persons Act, 1963. Next year a new establishment will be opened by a local authority which will provide for 20 girls and their babies where a court has made an order, and some voluntary bodies such as the Salvation Army provide homes specially for mothers in this


age group. It is a facet of society which we must face, but, like my hon. Friend, I think it has been perhaps over-dramatised and over-publicised in recent years.
Statistically, the illegitimacy rate is going up, but many illegitimate conceptions end in abortion either spontaneous or induced and on this no statistics are available. We do, however, have statistics, derived from birth registrations, on the number of illegitimate births, and these show that there has been a considerable increase in both the number and proportion of illegitimate births in recent years. In the period 1928–1940 the proportion of illegitimate live births to total live births remained fairly constant at between 4·1 and 4·6 per cent. There was an increase starting in 1945,

followed by a decline in the 1950s. There has, however, been a steady rise in the 1960s from 5·4 per cent. in 1960 about 8 per cent. at the present time.
The incidence of illegitimacy is by no means uniform over the country. It is bad in London, but there are some provincial towns where it is very bad indeed. This means we have a developing problem on our hands, and I hope that with the help of my hon. Friend and of society at large we shall be able to give increased protection to and provision of care for these girls who are in trouble.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Eleven o'clock.